by Abhilash S.
Kerala carries a familiar label: "deposit-surplus, credit-deficient." Deposits in its banks exceed what those banks lend, and its credit-deposit (CD) ratio runs below the national figure. The charge has been repeated in the state legislature and at State Level Bankers' Committee meetings for years: Kerala's savings, the argument goes, are shipped out and invested in other states, while the state's own firms, farmers and households are left short of credit.
The claim is not wrong on its face. But it is a claim about mechanism as much as magnitude, and the mechanism has been asserted far more often than tested. This article brings seven State Level Bankers' Committee (SLBC) returns for Kerala - six annual, end-March observations for 2021-2026 plus the quarter ending June 2026 - to bear on the question. Three findings emerge that jointly revise the conventional account.
First, Kerala's CD ratio rose from 65.5 to 72.9 per cent over the period, but the all-India ratio rose faster, from 71.7 to 80.1 per cent. The gap widened from 6.2 to 8.0 percentage points. The apparent convergence visible in Kerala's own series is an artefact of reading it without a comparator.
Second, credit measured against Kerala's resident deposit base alone has exceeded 100 per cent since March 2024, reaching 104.3 per cent in June 2026. Close to half of the rise in the headline ratio - 46.6 per cent - reflects the falling non-resident share of the denominator rather than any additional lending.
Third, the CD ratio is markedly lower among private-sector banks, which collect most non-resident deposits. That gap widened from 10.0 to 17.8 percentage points over the panel.
The conclusion has direct bearing on policy. CD-ratio floors computed against undifferentiated deposits - as the Reserve Bank of India's February 2026 draft Lead Bank Scheme guidelines propose - will systematically mismeasure high-remittance regions.
What the CD ratio can and cannot show
Before reviewing the evidence, it is worth being precise about what the CD ratio measures. The ratio compares advances outstanding with deposits outstanding. The RBI originally designed it as a branch-level supervisory check: a quick way to gauge whether a bank was putting locally gathered money to local use. It has three well-documented limitations.
First, it is a stock ratio computed from balance-sheet outstandings, not a flow measure of credit disbursed. A state can show a rising CD ratio purely because deposit growth has slowed, without any acceleration in real credit extension.
Second, it takes no account of investment. A bank holding a large statutory liquidity ratio portfolio against a state's deposits will show a low CD ratio while still deploying deposits productively. This is why the RBI and SLBC returns also compute a "C+I:D" ratio (credit plus investment to deposits), used alongside the narrower CD ratio throughout this article.
Third, the ratio says nothing about where credit sanctioned to a resident is actually booked. A large corporate borrower headquartered in Kerala but drawing credit through a treasury branch elsewhere will show up as credit extended outside Kerala, deflating the state's ratio. Kerala wants Britannia to operate more in the state; Britannia's corporate finance happens in Bombay.
There is a fourth objection, almost entirely absent from the Indian policy discussion. The implicit standard against which a state's CD ratio is judged deficient - the presumption that deposits mobilised in a region ought to be lent within that region - is contradicted by the basic purpose of a financial system. A financial system should move resources around the country. If India were cut into a hundred homogeneous regions and each imposed capital controls upon the others, every region would show a tidy savings-investment balance. It would also be a highly inefficient outcome, much as India's own capital controls hinder risk-sharing on a global scale. Large variation in CD ratios across Indian states is not a market failure to be corrected. It is what an integrated financial system looks like in a country of India's size, income variation, and heterogeneous investment opportunities. The evidence supports this. Bayoumi and Rose (1993), studying regions within the United Kingdom, found that regional saving and regional investment were essentially uncorrelated - capital moves to where its return is highest, and a region's savings bear no systematic relationship to the investment financed within its borders. Kerala shares the rupee, the RBI's regulatory perimeter, and a nationally branched banking system with the rest of India. On this logic, a Kerala CD ratio below 100 per cent is not an anomaly requiring explanation. It is the expected outcome of a functioning integrated capital market in which a high-saving region is a net exporter of loanable funds.
This does not dispose of the question. It reframes it. The interesting question is not why Kerala's CD ratio sits below 100 per cent, but whether the ratio is low relative to the appropriate national benchmark, and whether the gap, once the distinctive composition of Kerala's deposit base is accounted for, reflects anything about credit supply to Kerala's residents at all.
The data
The primary source is seven SLBC Kerala agenda-note statistical annexures, obtained as originally circulated. Each annexure is a multi-sheet spreadsheet - ranging from 43 to 73 tables depending on the year - covering branch and deposit statistics by bank, non-resident (NR) deposits, advances, CASA, CD ratio, investment, priority-sector advances by sub-sector, and district-wise Annual Credit Plan target-versus-achievement figures.
Two features of the source data required explicit handling. Table numbering is not stable across years - the same substantive table appears as table 8.1 in March 2021, table 10.1 in March 2022, table 11.1 from 2023 onward. Tables were matched by title text rather than position, and every match was manually verified. Row layout within a given table type is not fully stable either. In every case, the row explicitly labelled as the all-bank-group state total was extracted, and the resulting advances figure was cross-validated two independent ways - once as implied by the reported CD ratio applied to reported deposits, and once as directly reported in the NR-deposits-and-advances table. All seven years reconcile between these two independent figures to within rounding.
All monetary figures are converted to Rs crore throughout. One lakh is 100,000 and one crore is 10 million, so Kerala's March 2026 deposit base of Rs 10,62,695 crore is approximately Rs 10.6 trillion. No US dollar equivalents are given, because the rupee-dollar rate moved materially across the period.
The aggregate panel, 2021-2026
Kerala's banks held Rs 6,77,127 crore in deposits at the end of March 2021. Five years later, in March 2026, the figure stood at Rs 10,62,695 crore; by June 2026 it had crossed Rs 10,84,241 crore. That is a 57 per cent cumulative rise, or about 9.4 per cent a year. Advances grew faster: from Rs 4,43,554 crore to Rs 7,74,507 crore over the same five years, a 75 per cent increase, or roughly 11.8 per cent annually. When lending outruns deposit-gathering by about two and a half percentage points a year, the CD ratio climbs - and it did, from 65.5 per cent in March 2021 to 72.9 per cent in March 2026.
| As at | Deposits (Rs crore) | Advances (Rs crore) | CD Ratio % | NR Deposit % | C+I:D Ratio % |
| Mar-2021 | 6,77,127 | 4,43,554 | 65.51 | 33.91 | 74.08 |
| Mar-2023 | 7,94,076 | 5,47,988 | 69.01 | 30.35 | 73.05 |
| Mar-2025 | 9,48,249 | 6,83,513 | 72.08 | 30.96 | 78.57 |
| Jun-2026 | 10,84,241 | 7,81,043 | 72.04 | 30.94 | 75.69 |
Source: Author's calculations from SLBC Kerala agenda statistical annexures.
On its face, this is a different picture from the one the "deposit-surplus, credit-deficient" framing conjures. If the framing is read as a claim about levels - that Kerala's CD ratio sits well below what would be considered adequate - it still holds for the earlier years but becomes marginal for the later ones, since Kerala's ratio has been at or above 72 per cent, comfortably within the conventional adequacy range and well above the RBI's proposed 60 per cent floor, in every return from March 2024 onward.
But this reading is wrong, and wrong for a reason that has gone unnoticed in the Kerala debate: the national CD ratio rose faster.
Kerala against the national benchmark
For scheduled commercial banks across India, the CD ratio moved from 71.7 per cent at end-March 2021 to 72.1, 75.8, 79.5, and finally 80.1 per cent at end-March 2025. Kerala's own ratio over those same dates: 65.5, 64.6, 69.0, 73.2, and 72.1 per cent. Subtract one series from the other and the shortfall - the measure that actually captures Kerala's standing, yet one the state's debate has never produced - comes to 6.2 points in March 2021, 7.5 in March 2022, 6.8 in March 2023, 6.3 in March 2024, and 8.0 points by March 2025.
| As at | Kerala | All-India | Gap (pp) |
| Mar-2021 | 65.51 | 71.70 | -6.19 |
| Mar-2022 | 64.59 | 72.10 | -7.51 |
| Mar-2023 | 69.01 | 75.80 | -6.79 |
| Mar-2024 | 73.21 | 79.50 | -6.29 |
| Mar-2025 | 72.08 | 80.10 | -8.02 |
| Change (pp) | +6.57 | +8.40 | -1.83 |
Source: Kerala from author's calculations on SLBC Kerala returns; all-India from Government of India, Economic Survey 2025-26, Statistical Appendix, Table 3.3.
It has not narrowed. On the most recent observation for which a national comparator exists, it is the widest it has been in the panel. Kerala did not converge on the national benchmark during the post-pandemic credit expansion. It fell further behind it, while appearing - to anyone reading only Kerala's own numbers, as the state's political and journalistic discourse has largely done - to be catching up.
Two qualifications are owed. First, the national figures cover scheduled commercial banks, while Kerala's grand total includes the cooperative sector, whose CD ratio is the highest of any bank group in the state; the like-for-like commercial-bank comparison widens the gap slightly at both ends. Second, the national aggregate is pulled upward by Maharashtra and the metropolitan concentration of corporate credit booked in Mumbai, so the "national benchmark" is a composite dominated by a few financial centres. What survives both qualifications is the central point: relative to the country it is part of, Kerala's banking sector deployed a smaller share of its deposits as credit at the end of this panel than at the beginning.
Credit against the resident deposit base
If the widening gap to the national benchmark establishes that Kerala's relative position has deteriorated, it does not establish why. The answer reverses the intuition a second time.
The CD ratio's denominator is the total deposit base, of which between 30 and 34 per cent throughout this panel consists of non-resident deposits. Those deposits are not, in any economically meaningful sense, savings generated by Kerala's resident economy. They represent savings built up by Keralites working in the Gulf, held in rupees at Kerala branches because the family lives there, the exchange-rate treatment is favourable, and the tax position is convenient. The income that produced them was earned wholly outside Kerala.
This suggests an obvious diagnostic: the ratio of Kerala's bank advances not to its total deposits but to its resident deposits alone. Writing the CD ratio as the product of a lending-intensity term and a deposit-composition term:
\[ \textrm{CD} = \frac{A}{D_r} \frac{D_r}{D} = \textrm{CD}_r (1-s) \]
where $A$ is total advances, $D$ total deposits, $D_r$ resident deposits, and $s$ the non-resident share of deposits. The first term measures how intensively the banking system lends against the deposit base Kerala's own residents generate. The second is a pure composition effect.
The result is striking. Kerala's credit-to-resident-deposit ratio was 99.1 per cent in March 2021, dipped to 95.2 per cent in March 2022, recovered to 99.1 per cent in March 2023, and then crossed and remained above parity: 106.9 per cent in March 2024, 104.4 per cent in March 2025, 104.9 per cent in March 2026, and 104.3 per cent in June 2026. Measured against the deposits its own residents place with it, Kerala's banking system has since 2024 been lending out more than the whole of that base, funding the excess from non-resident deposits that the CD ratio's denominator treats as though they were locally generated savings awaiting local deployment.
| As at | Total deposits | NR deposits | Resident deposits | Advances | CD ratio % | Credit / resident deposits % |
| Mar-2021 | 6,77,127 | 2,29,645 | 4,47,482 | 4,43,554 | 65.51 | 99.12 |
| Mar-2022 | 7,41,122 | 2,38,412 | 5,02,710 | 4,78,657 | 64.59 | 95.22 |
| Mar-2023 | 7,94,076 | 2,40,975 | 5,53,101 | 5,47,988 | 69.01 | 99.08 |
| Mar-2024 | 8,61,295 | 2,71,259 | 5,90,036 | 6,30,559 | 73.21 | 106.87 |
| Mar-2025 | 9,48,249 | 2,93,622 | 6,54,627 | 6,83,513 | 72.08 | 104.41 |
| Mar-2026 | 10,62,695 | 3,24,636 | 7,38,059 | 7,74,507 | 72.88 | 104.94 |
| Jun-2026 | 10,84,241 | 3,35,440 | 7,48,801 | 7,81,043 | 72.04 | 104.31 |
Source: Author's calculations from SLBC Kerala agenda statistical annexures. Resident deposits are total deposits less non-resident deposits as reported in the source returns.
One caution is needed before reading too much into the above-parity figure. Kerala's resident-adjusted ratio of 104-107 per cent says nothing about whether peer states, similarly adjusted, would not be higher still. Tamil Nadu, Andhra Pradesh and Telangana report headline CD ratios above 130 per cent; their resident-adjusted ratios would depend on their own NR deposit shares, which this article's data do not cover. The resident-deposit adjustment establishes that the wedge between the conventional ratio and the resident-deposit ratio in Kerala is of the order of thirty percentage points -large enough to reverse the sign of the naive policy conclusion. It does not establish that Kerala, once adjusted, lends more intensively than every peer. That comparison requires non-resident deposit data for other states, which the SLBC returns of those states would supply, and which this article flags as the most valuable single extension of this work.
The same arithmetic decomposes the much-discussed rise in the headline ratio. Split the increase between March 2021 and March 2026 into its two parts and 53.4 per cent comes from banks lending more heavily against the resident deposit base. The remaining 46.6 per cent comes from the non-resident share of deposits slipping from 33.9 to 30.6 per cent - a shift in the mix that lifts the measured ratio while no extra rupee leaves any branch. Close to half of the CD-ratio improvement that has been read in Kerala as evidence of a credit revival is an artefact of the denominator.
Three implications follow. First, diagnostic: the standard CD ratio, applied to a region with a large externally generated deposit base, does not measure what its users take it to measure. Second, substantive: the coexistence of a widening gap to the national benchmark with an above-parity resident-deposit ratio is not a contradiction but the signature of the mechanism the international remittance literature predicts. Chami, Fullenkamp and Jahjah (2005) argued that remittances are compensatory transfers responding to household need rather than profit-seeking flows responding to local investment return. Giuliano and Ruiz-Arranz (2009) found that remittances raise growth more strongly in countries with less developed financial systems, on the interpretation that remittances substitute for bank credit by relaxing household borrowing constraints. Applied to Kerala: remittance income directly finances the house construction, education, land purchase, and small-business formation that a resident household elsewhere would finance by borrowing. Remittances do not merely fail to stimulate credit demand - they actively displace it. Third, procedural: a regulatory framework that sets quantified CD-ratio floors against an undifferentiated deposit denominator will systematically mismeasure the regions whose deposit base is most distinctive, and will do so in the direction of penalising them.
A divided banking sector
The aggregate CD ratio is a deposit-weighted average across a banking sector that is unusually heterogeneous in ownership structure even by Indian standards. Disaggregating by bank group produces the single most striking finding of this article: the CD ratio differs sharply and persistently across bank groups, and the gap between public-sector and private-sector banks has been widening.
| Bank group | Mar-2021 | Mar-2024 | Mar-2026 |
| Public sector banks (excl. RRB) | 68.34 | 77.57 | 80.44 |
| Public sector incl. RRB | 70.13 | 78.91 | 81.99 |
| Private sector banks | 58.35 | 66.25 | 62.66 |
| Small finance banks | 56.93 | 43.38 | 39.51 |
| All commercial banks | 64.81 | 72.41 | 72.24 |
| Cooperative banks | 71.45 | 83.14 | 81.79 |
| All-Kerala grand total | 65.51 | 73.21 | 72.88 |
Source: Author's calculations from SLBC Kerala agenda statistical annexures.
Public-sector banks' CD ratio rose from 68.3 per cent to 80.4 per cent over the panel. Private-sector banks rose only from 58.4 per cent to 62.7 per cent. What was a 10.0-point gap in March 2021 had become 17.8 points by March 2026. As of the latest returns, public-sector and cooperative banks in Kerala advance over eighty paise of each rupee deposited; their private-sector counterparts advance closer to sixty.
This matters because private-sector banks are also the segment most actively engaged in collecting non-resident deposits. Federal Bank, South Indian Bank, CSB Bank, and the larger pan-Indian private banks between them account for a substantial share of the NRE/NRO deposit franchise. If the "deposit-surplus, credit-deficient" narrative is read as a claim that deposits mobilised in Kerala are disproportionately not being redeployed as credit within the state, the claim is considerably more true of the private-sector segment than of the system as a whole.
Cooperative banks recorded the highest CD ratio of any bank group in every year - 71.5 per cent in March 2021, 83.1 per cent in March 2024, 81.8 per cent in March 2026 - consistent with a deposit base drawn largely from resident sources and a lending mandate directed toward agriculture and local trade. Small finance banks show the most dramatic trend: a CD ratio of 56.9 per cent in March 2021 falling to 39.5 per cent in March 2026, consistent with a business model shifting from microfinance-adjacent lending toward conventional deposit-gathering retail banking.
The bank-group findings recast, without fully resolving, the "extraction" narrative. They are consistent with a specific mechanism - deposits collected by NR-deposit-heavy private banks being disproportionately deployed outside Kerala รข€” but the SLBC data cannot distinguish this from an alternative in which private banks are simply more centralised in credit-sanctioning for reasons unrelated to deposit source. One supply-side factor deserves explicit mention here: lenders operating in Kerala have long reported that non-performing asset recovery is unusually difficult in the state, whether through the civil courts or the tribunals. Banks are commercial creatures; if recovery of principal is uncertain, expected returns on Kerala lending fall for any given contractual rate, and lending contracts regardless of deposit composition. The SLBC returns contain NPA and recovery tables, but their layouts proved too inconsistent across years to reconcile into a panel within the scope of this article. Whether private banks' lower Kerala CD ratios correlate with higher experienced NPAs in the state is a question the data assembled here cannot answer, and it is flagged as a priority for the next round of work.
The sectoral composition of credit
A genuine credit revival reaching farmers and small businesses should show up as a stable or growing priority-sector share of total advances. It has not. It has fallen.
| As at | Agriculture % | MSME % | Other priority % | Total priority % |
| Mar-2021 | 22.00 | 14.00 | 14.00 | 50.00 |
| Mar-2023 | 22.27 | 12.96 | 11.89 | 47.12 |
| Mar-2024 | 23.18 | 13.66 | 8.99 | 45.83 |
| Mar-2026 | 22.46 | 13.63 | 9.78 | 45.86 |
| Jun-2026 | 22.55 | 13.95 | 9.48 | 45.98 |
Source: author's calculations from SLBC Kerala agenda statistical annexures. Non-priority-sector share is 100 minus the total priority-sector share shown.
Priority-sector advances accounted for 50.0 per cent of total advances in March 2021 and 46.0 per cent in June 2026. Agriculture's share was essentially flat; MSME's share held broadly steady; the largest decline was in the residual "other priority sector" category. The mirror image is a rising non-priority-sector share, from 50.0 to 54.0 per cent - a category that includes large-ticket corporate and trade credit, personal loans, and the bank-originated share of the gold-loan market.
One institutional feature not directly visible in the SLBC tables deserves note. Kerala is the headquarters state of India's two largest gold-loan NBFCs, Muthoot Finance and Manappuram Finance. NBFC lending does not appear in the SLBC deposit-and-advance framework at all. Any assessment of credit availability that relies solely on the bank CD ratio will understate total credit access to the extent that NBFCs have substituted for bank lending.
Credit and the real economy
All of this is a story about banking statistics. But credit exists to serve the real economy, and the real economy of Kerala supplies important context for reading the ratios. Three features of that economy matter.
First, Kerala's growth and investment record has lagged its southern peers. State GSDP growth has run below that of Tamil Nadu, Karnataka and Telangana through most of the past decade, and capital formation in the state - public and private capex relative to GSDP - has been correspondingly weaker. A state whose commodity-producing sectors grow slowly generates fewer large, bankable investment projects, and the credit book that results is necessarily weighted toward small-ticket retail and agricultural lending. This is the demand side of the CD-ratio story, and it predates the remittance boom: Narayana (2003) attributed Kerala's low CD ratio to exactly this feature two decades ago, and the sectoral composition data in this article suggest the underlying structure has not been transformed since.
Second, Kerala's labour market is anomalous in ways that bear directly on credit demand. The Periodic Labour Force Survey records Kerala's unemployment rate at 7.2 per cent in 2023-24, against an all-India figure of 3.2 per cent; youth unemployment stands near 30 per cent. The labour force participation rate, at roughly 56 per cent, sits below the national average, pulled down in particular by low female participation despite the state's high female literacy. A labour market in which a large share of the working-age population is outside employment, and in which those seeking work face long search times, is one in which household investment in enterprise - the classic driver of small-business credit demand - is structurally muted. Remittances fill part of the gap: they finance consumption, housing and education for households whose labour-market earnings are weak, and in doing so they substitute for the borrowing that would otherwise finance those expenditures.
Third, Kerala's households are not under-borrowed by national standards. The National Statistics Office's 78th round records nearly three in ten Kerala adults as indebted - 29.9 per cent, against a national average of 14.7 per cent, and third among major states behind Andhra Pradesh (43.7 per cent) and Telangana (37.2 per cent). The southern region as a whole records the highest financial inclusion and the highest indebtedness of any Indian region. High household debt in Kerala coexists with a middling CD ratio for the reasons this article has documented: a large share of the borrowing is met by NBFCs rather than banks, and a large share of the expenditures that elsewhere generate borrowing are met by remittances instead. The point is not that Kerala households have too much debt; it is that the CD ratio cannot be read as a measure of household credit deprivation when the households in question already carry debt burdens well above the national average, financed substantially outside the banking system the ratio measures.
Explaining the gap
No single explanation is sufficient on its own, and the data do not permit assigning precise relative weights. The most defensible synthesis is the following.
The starting point must be that "persistently sub-parity CD ratio" is itself the wrong description of what requires explaining, since Kerala's advances exceed its entire resident deposit base and have done so since 2024. What requires explaining is the wedge between that measure and the conventional one, and the residual gap to the national benchmark that survives after the wedge is accounted for.
With the question posed that way, the answer is the joint product of a genuinely distinctive deposit structure - a large, migration-driven, savings-oriented non-resident deposit base that mechanically depresses the ratio, concentrated disproportionately in the private-banking segment - and a real, if narrowing, structural weakness on the credit-demand side rooted in the real economy: slow growth in commodity-producing sectors, a labour market with low participation and high unemployment, and an enterprise base that remains dominated by small units generating small-ticket credit demand. Institutional differences in how public-sector, cooperative, and private banks deploy deposits locally appear to compound rather than substitute for these two forces, most visibly in the widening public-private CD-ratio gap; and the difficulty of NPA recovery in Kerala, reported anecdotally by lenders and not measurable from the data assembled here, may independently deter private-bank lending for purely commercial reasons.
None of this amounts to either a simple vindication of the "extractive banking" narrative that dominates Kerala's political discourse, or a simple dismissal of it in favour of a purely structural-demand account. Both mechanisms are real, they interact, and current public administrative data are not sufficiently granular to say with confidence how much of the persistent gap each accounts for.
Policy implications
The starting point for policy is not the banking system but the real economy. If Kerala's CD ratio is low in substantial part because the state's enterprise base generates comparatively little large-ticket credit demand, then the core requirement for creating more credit in Kerala is stimulating larger firms to invest in the state. That means industrial policy - land, infrastructure, power, logistics - aimed at raising the average scale of Kerala's manufacturing and services units, and measures to retain Kerala-origin entrepreneurial capital within the state rather than see it deployed in larger ventures elsewhere in India or abroad. Larger firms investing in Kerala would attract credit automatically, including the local deployment of NRI savings that the present structure fails to achieve. Credit follows investment; it does not precede it. A state that fixes its investment climate will find its CD ratio takes care of itself, in either direction the real economy dictates.
The most immediate banking-policy context is the RBI's February 2026 draft revision of the Lead Bank Scheme guidelines, circulated for public comment with a deadline of 6 March 2026. For the first time, the draft proposes a quantified, binding CD-ratio floor - 60 per cent - specifically for rural and semi-urban bank branches, together with a tiered district-level monitoring structure: districts with a rural/semi-urban CD ratio between 40 and 60 per cent are to be monitored by District Consultative Committees, districts below 40 per cent are to be referred to a special sub-committee, and districts below 20 per cent are to be classified as a distinct "special category" triggering state-government infrastructure-support commitments.
A prior objection to the norm's construction needs stating, because the evidence bears on it directly and because it applies to every state, not only Kerala. The proposed floor is a ratio of advances to deposits, with deposits taken undifferentiated. The definitional choice alone shifts Kerala's measured ratio by roughly thirty points. The same advances, on the same day, give 72.9 per cent when set against all deposits but 104.9 per cent when set against resident deposits only. A regulatory threshold applied to a quantity that can be moved thirty points by a definitional choice is one whose sorting will be driven substantially by that choice. And the direction of the error is not neutral. The burden falls hardest on exactly those districts and bank groups holding the largest non-resident deposits: the coastal belts of highest out-migration, where households sent workers abroad and received savings in return. Their banks then score poorly for not lending against money the local economy never produced and, judging by the resident-deposit ratio, does not actually need.
A straightforward remedy is available and would cost the RBI nothing in additional data collection, since non-resident deposits are already separately reported in the SLBC returns: compute the norm against resident deposits, or publish both ratios and apply supervisory judgement to the difference between them.
With that objection registered, Kerala's position against the norm as drafted is close but not comfortable. The state's aggregate semi-urban CD ratio stood at 62.1 per cent in March 2026 and 61.7 per cent in June 2026 - above the proposed floor, but by a margin that a single adverse quarter could plausibly erase. The state's rural CD ratio, by contrast, has been comfortably above the floor throughout the panel (83.5 per cent in March 2026). It is Kerala's semi-urban branches, not its rural ones, that sit closest to the new norm - a configuration that may be specific to Kerala's unusually blurred rural-urban settlement geography and that the RBI's national guideline, designed with more conventionally agrarian low-CD-ratio states in mind, may not have anticipated.
One data gap deserves explicit flagging. The SLBC returns do not include a genuine district-wise breakdown of deposits, advances, or the CD ratio as stock variables. The only district-level series available is the Annual Credit Plan achievement table, which reports credit disbursed against locally negotiated targets - a flow measure whose target-setting process is endogenous to realised disbursement, so that achievement ratios clustered just above 100 per cent carry no reliable signal about underlying credit adequacy. This article therefore cannot say which, if any, of Kerala's fourteen districts would fall into the RBI's monitoring tiers under the new framework. Either district-level stock data exists internally and simply is not published, in which case its publication would be a straightforward step toward making the new framework's operation transparent; or it does not yet exist in usable form, in which case its construction should be treated as a prerequisite for implementing the new norm credibly in Kerala's case.
A broader methodological point
The CD ratio is used across India, and in variants across much of the developing world, as a summary indicator of whether a region's banking system is serving it adequately. It is computed, everywhere, against an undifferentiated deposit denominator. Wherever a substantial part of that denominator is generated outside the local economy - by migrant remittances, as in Kerala, but equally by resource rents booked locally, by pension or transfer inflows, or by any deposit base whose origin is disconnected from local investment opportunity - the ratio will understate local credit intensity by an amount that rises with the externally generated share, and will do so in a way that looks exactly like bank underperformance. In Kerala's case the distortion is of the order of thirty percentage points, large enough to reverse the sign of the policy conclusion. Regulators proposing to convert this indicator into a binding quantitative floor are proposing to give that measurement error regulatory force.
Kerala's low, and now less low, credit-deposit ratio has been a fixture of the state's economic self-description for over two decades, treated by turns as an injustice, an embarrassment, and a structural fact of life, but examined systematically, with contemporary data, remarkably rarely. What the data assembled here suggest is that both of the confident readings on offer have been wrong in instructive ways: the state's banks are not withholding credit from Kerala's residents, who receive more than they deposit, and neither is Kerala quietly catching up with the rest of the country, from which it has continued to fall behind. Both errors have the same origin: the habit of reading a ratio without asking what is in its denominator.
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Abhilash S. is Deputy Secretary, Finance Department, Government of Kerala. The author thanks the SLBC Kerala convenor bank's office for making the agenda notes available in the public domain, and two anonymous referees for comments on an earlier draft. The views expressed here are the author's own and do not represent the position of the Government of Kerala.
