Published Online:January 2026
Product Name:The IUP Journal of Applied Economics
Product Type:Article
Product Code:IJAE030126
DOI:10.71329/IUPJAE/2026.25.1.44-63
Author Name:Silu Muduli and Tejadipta Behera
Availability:YES
Subject/Domain:Economics
Download Format:PDF
Pages:44-63
This paper analyzes the state-level variation in the credit-deposit ratios in India. The credit-deposit ratio in the southern, western, and northern states of India is above the national average. By contrast, in some other states, it is below 50%. The paper finds that states where households have a higher share of valuables (gold jewelry, gems and precious stones) in their asset composition, have a higher share of personal and agricultural loans, and consequently, greater indebtedness. A higher per capita income and better infrastructure and banking service availability create a higher demand for credit, leading to a higher credit-deposit ratio. Moreover, an improved ease of doing business and the presence of self-help groups can also lead to higher levels of indebtedness. States with a higher contribution to national industry gross value added have a higher demand for industrial loans. A shred of similar evidence also exists for agricultural loans. Improved infrastructure, continuous credit monitoring and promotion of rural economic activities in states having low credit-deposit ratios can accelerate credit offtake and improve the credit-deposit ratio.
A series of financial inclusion policies were implemented in India in the post-independence period to include all citizens in the formal banking system. In the spirit of inclusive banking, banks were nationalized in 1969 and 1980.