Investments to deposits ratio of the Indian banking industry fell to a four-month low as banks allocate more of their existing funds to loans that yield higher returns than bonds.
Data from the Reserve Bank of India (RBI) showed that the investments to deposits ratio is now closer to 29% compared with a recent peak of 30% recorded in August indicating that banks have started shifting their deposits to higher yielding loans as credit demand picks up.
Investment to deposit ratio indicates the amount of deposits that is utilised by banks as investments primarily for loans. As credit growth has picked up, banks have started to increasingly use their deposits.