India's Banking LDR Hits Record 81.6%: Warning, Not Crisis

• India's banking system's Loan-to-Deposit Ratio (LDR) reached a record 81.6% in December, signaling tight liquidity.
• A high LDR (above 80%) can impact bank margins, loan growth, and policy transmission, but RBI has no hard cap.
• The rise is driven by strong loan growth (12%) and slowed deposit growth (single digits), indicating a structural shift.
• HDFC Bank's LDR hit 99.5% in Q3FY26, causing investor concern, with similar trends across other banks.
• Despite the warning, it's not an immediate crisis due to excess SLR buffers and stable asset quality, but requires close monitoring.

Why It Matters: India's rising LDR is a crucial liquidity signal for banks, requiring close monitoring despite no immediate crisis.