India's Banking Sector Grows Lending Faster Than Deposits

India’s economy is still growing strongly, even though fuel prices are rising and the monsoon has been weak.

Banks are in better health than they were in the past, with fewer bad loans and strong capital buffers.

However, banks are lending money faster than they are collecting deposits from customers.

This means they may need to borrow more from other sources, which can be more expensive and less reliable.

Their profit margins have already become narrower.

Rural families are also saving less, which could reduce the money available to smaller banks.

Some areas, such as microfinance and personal loans, are beginning to show signs of repayment stress.

The central bank has provided temporary support through foreign-exchange deposit measures.

Banks are being urged to attract more deposits and identify loan problems early.