A comprehensive research report by State Bank of India has identified two major risk factors threatening the stability of India's banking sector: the dramatic surge in unsecured lending and the persistent concentration of banking business in select districts. The analysis, covering two decades of banking data, reveals concerning trends that could impact the sector's long-term health.

Sharp Rise in Unsecured Lending Raises Alarm

The SBI research team, led by chief economic advisor Soumya Kanti Ghosh, has highlighted the exponential growth in unsecured advances as a primary concern. The data shows a staggering increase from ₹2.00 lakh crore to ₹46.90 lakh crore over the study period, with the share of unsecured loans in total advances rising significantly.

Since fiscal 2019, unsecured loans have consistently maintained a share above 20% of total bank advances. Public sector banks account for half of this unsecured lending, followed by private sector banks, indicating widespread participation across the banking ecosystem.

Overall Banking Sector Expansion

Despite the risks, the banking sector has witnessed substantial growth across key metrics over the past two decades. The research reveals impressive expansion in both deposits and advances, reflecting the sector's overall development.

The faster growth in credit compared to deposits has resulted in an increased credit-deposit ratio, rising from 69% in FY21 to 79% in FY25, indicating more aggressive lending practices across the sector.

Regional Concentration and Disparities

The research reveals significant regional imbalances in banking penetration and credit distribution. While some regions show robust credit-deposit ratios, others lag considerably, creating an uneven banking landscape across the country.

High-Performing Regions:

• Southern, western, and northern regions dominate high credit-deposit ratios
• Southern region districts show better credit-deposit ratios compared to other regions
• 75 districts maintain credit-deposit ratios above 150%

Underperforming Areas:

• Eastern and north-eastern regions significantly lag in credit-deposit ratios
• Major states including Odisha, Bihar, Jharkhand, and West Bengal show credit-deposit ratios below 52%
• 226 districts have credit-deposit ratios below 50%

District-wise Concentration Analysis

The concentration of banking business in select districts presents another risk factor. The top 10 districts hold disproportionate shares of both deposits and credit, while the top 100 districts dominate the sector's business.

The analysis identifies specific regional mismatches in deposit and credit concentrations. Nagpur, Patna, North-24 Parganas, and Trivandrum feature among the top 25 deposit districts but not in the top 25 credit districts. Conversely, Chandigarh, Indore, Ludhiana, and Raipur rank among the top 25 credit districts without being top deposit centers.

Public Sector Banks Show Recovery Signs

Despite the identified risks, the research notes positive developments in the public sector banking space. After experiencing a secular decline since FY08, public sector banks have arrested their market share loss and are gradually reclaiming lost ground. This trend indicates successful balance sheet repair and renewed lending appetite among state-owned banks.

The SBI research underscores the need for careful monitoring of these risk factors while acknowledging the sector's overall growth trajectory. The combination of rising unsecured lending and regional concentration presents challenges that require strategic attention to ensure sustainable banking sector development.

India's banking sector has demonstrated remarkable growth momentum, with the Credit-Deposit ratio climbing to 82% as of December 15, 2025, marking a substantial increase from 53% in 2000-01, according to an SBI Research Report released on Monday. This upward trajectory reflects the ongoing financialisation of India's economy and signals better financial development leading to strong economic growth.

Banking Sector's Post-Pandemic Revival

Indian banks have exhibited strong post-pandemic balance sheet recovery, with bank asset growth rebounding sharply to 94% of GDP compared to 77% in FY21. This revival reflects renewed credit intermediation and financial deepening across the banking system. The incremental CD ratio numbers crossed 100% in multiple instances, demonstrating increasing credit demand despite lean deposit growth, with banks meeting this demand by raising resources from alternative sources.

Massive Scale Expansion Over Two Decades

The banking system has witnessed unprecedented scale expansion between FY05 and FY25, with both deposits and advances growing manifold:

The faster growth in advances compared to deposits has driven the CD ratio increase from 69% in FY21 to 79% in FY25.

Public Sector Banks Reclaim Market Share

Public Sector Banks have shown continued revival after experiencing secular decline since FY08. PSBs are gradually reclaiming market share in both deposits and advances, indicating successful balance sheet repair and renewed lending appetite. From a peak of 71% market share in FY08, PSBs had witnessed steady decline, but latest data suggests a turnaround in their fortunes.

Evolving Banking Landscape and Employment Growth

The CASA stability has masked divergent trends across bank groups, with overall CASA ratios remaining around 37%. However, private banks have strengthened their CASA shares while foreign banks witnessed erosion. Unsecured advances expanded dramatically from ₹2.00 lakh crore to ₹46.90 lakh crore, with their share rising to 24.5% in FY25 from 17.7% in FY05.

Banking employment nearly doubled over two decades:

The significant increase in officer share from 36% to 76% indicates skill intensification and preference for higher-value roles within the banking sector. PSBs account for half of the unsecured lending market, followed by Private Sector Banks, demonstrating their continued relevance in India's credit landscape.