Banks eye Rural loan growth to push credit-deposit ratio - Mihir Mishra, Shayan Ghosh

Mint

India’s rural borrowers and small businesses owners may have easier access to credit with public sector banks (PSBs) planning to increase financing to these segments, after the Union finance ministry urged lenders to improve their credit-deposit ratio.

The C-D ration indicates how much of a banks' deposit base is being utilized for extending loans. The development may help expedite the revival of the rural economy, which is struggling to reach pre-covid levels, with micro, small and medium enterprises, a major employment generator for rural India sti; struggling to return to normalcy. 

The move is also expected to help the Bharatiya Janta Party led government in a year of nine state elections, considering rural distress and unemployment could have a potential impact on polls. 

Initiatives planned by banks include collaborating with non-bank lenders, including housing finance companies, to provide a major credit push for small businesses through MSME clusters. According to the plan, state-owned banks have a target to increase credit in areas where the C-D ratio is below 60%. India's C-D ratio stood at 72.1 in FY22, RBI data showed, with the Western region having the highest ratio at 86.9, followed by the South at 84.1 and North India at 75.5.  

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