The money is arriving. Loans are growing. Yet in Jammu and Kashmir, the distance between the two remains unusually wide.
The region’s banking sector recorded 9.85 percent year-on-year growth in total banking business in the financial year ended March 2026, with deposits and advances both rising by nearly 10 percent. On the surface, it is a picture of healthy expansion.
But one number tells a different story.
The credit-deposit (CD) ratio – a key indicator of how much of the deposits mobilised by banks is converted into loans – rose from 61.14 percent on March 31, 2025, to just 61.15 percent a year later.
A movement of 0.01 percentage point is, in practical terms, almost no movement at all.
That has prompted the J&K administration to push banks to lend more. At a review meeting chaired by Chief Secretary Atal Dulloo, banks were asked to work collectively to raise the CD ratio from around 61 percent towards the national average of approximately 81 percent.
The administration has also asked banks to prepare a roadmap, with defined strategies and interventions, to progressively improve the ratio.
The concern is not that banks are failing to lend. Rather, credit is not expanding fast enough relative to deposits being generated within the region.
Aggregate deposits with banks operating in J&K increased 9.84 percent, from Rs 1,96,968 crore to Rs 2,16,352 crore, while advances grew 9.86 percent, from Rs 1,20,424 crore to Rs 1,32,296 crore.
Because deposits and advances are growing at virtually the same pace, the relationship between them remains largely unchanged.
For every Rs 100 deposited, roughly Rs 61 is being deployed as credit.
The low CD ratio does not necessarily mean the remaining money is idle; banks may deploy funds through investments and other channels. But from the perspective of regional development, it raises a fundamental question: how much of the financial resources mobilised in J&K are being channelled into productive activity within J&K itself?
Credit finances working capital, business expansion, farm equipment, housing, trade, tourism and new investment. For small entrepreneurs, institutional finance can determine whether a business expands and creates employment. For farmers and orchardists, it can support mechanisation, storage and productivity.
A low CD ratio can therefore signal an opportunity as much as a weakness.
But raising it should not become a numerical exercise. Pushing more loans simply to meet a target could raise the ratio temporarily while creating future problems in the form of non-performing assets. The objective must be sustainable credit—finance extended to viable borrowers and productive activities on terms that allow loans to be repaid.
This is where physical access to banking becomes important.
J&K’s banking infrastructure has expanded substantially over the past five years. As of March 2026, 37 banks were operating through 11,703 banking touchpoints, including 2222 brick-and-mortar branches and 9481 banking correspondents.
The improvement in population coverage is striking. In March 2021, there was one banking outlet for every 2546 people. By March 2026, that figure had fallen to one outlet for every 1048 people. There was also one banking delivery point for every 3.61 sq km.
Yet financial access and financial participation are not the same thing.
A banking correspondent can provide basic services, but complex borrowing decisions often require documentation, financial assessment, and repeated interaction with bank officials. For many small businesses and rural borrowers, a physical branch can make a significant difference.
The RBI Regional Director has therefore encouraged banks to open more brick-and-mortar branches, particularly in rural areas. The Chief Secretary has similarly stressed outreach in rural and far-flung areas and directed banks to prepare a time-bound plan for establishing new branches over the next year.
The emphasis is relevant to J&K’s economic structure. Agriculture and horticulture are overwhelmingly rural. Tourism extends into smaller towns and remote destinations, while handicrafts, trade, transport and local services are dispersed across districts.
A banking system can therefore have an impressive physical footprint and still leave sections of the productive economy under-financed.
The Annual Credit Plan figures reinforce that point.
During 2025-26, banks provided aggregate credit of Rs 84,384.12 crore to 19.37 lakh beneficiaries, against a target of Rs 77,974.29 crore for 19.90 lakh beneficiaries.
In financial terms, banks achieved 108 percent of the target. In terms of beneficiaries, however, they achieved only 97 percent.
The divergence is significant. Banks deployed more money than targeted, but reached fewer beneficiaries. It could reflect larger average loans or stronger disbursement in particular sectors. But it also shows why increasing the volume of credit does not automatically mean widening access.
The CD ratio must therefore be viewed alongside beneficiary numbers, sectoral distribution, loan sizes, rural coverage and lending quality.
For J&K, the central challenge is not simply more credit, but better-distributed and economically productive credit.
Banks will need to understand the financing needs of orchardists, farmers, tourism operators, handicraft producers, traders, small manufacturers and service businesses. Many have seasonal or irregular cash flows and may not fit conventional lending models.
At the same time, flexibility cannot mean weaker lending discipline. Better credit assessment, improved financial literacy, simpler procedures and stronger borrower-bank relationships will be essential if lending is to expand without creating future stress.
The national CD ratio of approximately 81 percent provides a useful benchmark, but J&K need not reach it overnight. A gradual rise supported by sound lending would be more meaningful than a sudden jump achieved by compromising credit quality.
The broader opportunity is clear.
J&K’s banking sector has already demonstrated that it can expand its physical reach. Deposits and advances are up nearly 10 percent, while total banking business has grown 9.85 percent. The number of people served per banking outlet has fallen by more than half in five years.
The next test is whether that expanding network can translate into deeper economic reach.
If more deposits can be responsibly channelled into productive local investment, the benefits could extend beyond bank balance sheets – to businesses, farms, tourism, employment and household incomes.
The government has asked banks for a roadmap.
The harder task will be ensuring that the roadmap produces not merely a higher ratio, but a stronger economy.
Because the real measure of a bank’s contribution to a region is not simply how much money it holds.
It is what that money makes possible.
About the Author
Moien Darial, an MBA, writes with the precision of an analyst and the sensitivity of a storyteller, exploring global economic shifts and emerging technologies.
