•India's banking system faces a new challenge as loan disbursement significantly outstrips deposit growth, creating funding pressure.
•Credit growth is at 14.5% while deposit growth is only 11.9%, widening the gap to 150-300 basis points.
•Banks are increasingly relying on Certificates of Deposit (CDs) to bridge the funding gap, with CDs reaching a decade-high share of 2.6% of total deposits.
•Changes in investment patterns, with people favoring mutual funds and stock markets over bank deposits, are contributing to the decline in deposits.
•The reliance on expensive wholesale funding like CDs could impact banks' profitability and create asset-liability imbalances, prompting potential strict measures from RBI.
