“Banks Can Be Matchmakers Bengal Needs To Unlock Its Investment Potential”: NITI Aayog Vice Chairman Dr Ashok Lahiri At CII 19th Banking Colloquium

Can banking play a larger role than simply providing credit? This question set the tone for the discussions at the CII 19th Banking Colloquium, where Dr Ashok Lahiri, Vice Chairman, NITI Aayog, examined the relationship between credit flow, investment and Eastern India’s industrial growth.

Dr Lahiri said, “Banking serves multiple purposes. However, if we look at the root of the word ‘bank’, a banker has traditionally been understood as a moneylender. But can banking go beyond providing credit? Technically, yes. One of the fundamental functions of banks is to provide a safe place for people to store their wealth. People do not necessarily deposit money in banks only to earn interest; the need for security is equally important.”

Emphasising statistics, Dr Lahiri said, “Between February 2016 and March 2024, Japan experienced a prolonged period of low interest rates, including negative interest rates introduced by its central bank to stimulate economic activity. The volume of credit extended by banks is generally lower than their total deposits. Banks also manage their liquidity risks by investing in instruments such as government bonds.”

“The latest data indicates that India’s Credit-to-Deposit (CD) ratio stands at around 80%, compared to approximately 360% in China. The RBI does not prescribe a universal benchmark for the Credit-to-Deposit ratio. Does this mean Indian banks provide insufficient credit to the private sector? India’s credit-to-GDP ratio was relatively modest in the past, remaining between 70% and 76% until 2020. It subsequently increased to 82% in the first quarter of 2026–27. One possible reason for relatively low private-sector credit is the limited availability of bank deposits,” he added.

Noting that regional variations in the Credit-to-Deposit ratio are also significant, Dr Lahiri said, “In 2023, the Southern Region recorded a CD ratio of 93.6%, while the Eastern Region had the lowest ratio at 47.5%. The Western Region stood at 82.8%, the Northern Region at 77.5%, the Central Region at 56.1%, and the North-Eastern Region at 50%. These figures indicate considerable differences in credit deployment across regions. Deposits may be mobilised in one region but utilised for lending and investment elsewhere. Factors such as Ease of Doing Business (EoDB) and the role of Self-Help Groups (SHGs) also influence regional credit growth.”

Posing a question on why Eastern India has a relatively low CD ratio, Dr Lahiri explained, “One of the reasons could be the limited availability of bankable investment opportunities and productive economic activity. West Bengal’s share of the population is higher than its share of national income. Its per capita income is approximately ₹2 lakh, which remains below the national average. Limited industrial modernisation is another factor contributing to low productivity and weaker credit absorption. The State needs to strengthen its investment-driven economy, as economic growth cannot be sustained without continuous expansion and modernisation.”

Explaining further, he said, “Two important steps can help improve the CD ratio: (i) Encourage large-scale investments – The development of major infrastructure projects, such as a deep-sea port, could create fresh investment opportunities and send a strong signal to potential investors. (ii) Attract and facilitate industrial expansion – The State must encourage new large-scale industries as well as MSMEs, creating a stronger demand for institutional credit and supporting employment generation.”

Taking the discussion further, Dr Lahiri stated, “Banks have extensive business networks, established industry relationships and knowledge of investment opportunities. They can act as facilitators and matchmakers by connecting businesses with suitable financial resources and investment opportunities. This would benefit both the State and the banking sector.”

“There is also a need to improve credit absorption across the State. Large-scale investments can attract further investments and create a multiplier effect. Banks can also help smaller enterprises grow into larger businesses through structured credit facilities and capacity-building programmes,” he added.

Mr Rudra Chatterjee, Deputy Chairman, CII Eastern Region and Managing Director, Luxmi Group & Chairman, Obeetee, highlighted the importance of strengthening the MSME ecosystem and enabling small enterprises to scale up into larger businesses.

Addressing the gathering, Mr Prithish Chowdhary, Vice Chairman, CII West Bengal State Council and Deputy Managing Director, Titagarh Rail Systems Ltd, said, “What must West Bengal do to attract investments? It must first recognise and realise its true potential. Several prominent banks, including SBI, Bandhan Bank and UCO Bank, have their origins in West Bengal.”

He added, “As per RBI, the Western Region accounts for ₹61.89 lakh crore in scheduled commercial bank credit, compared to ₹13.61 lakh crore in the Eastern Region. This raises an important financial question: despite having a strong savings base, why is a relatively smaller share of capital being channelled into investments in West Bengal? The State accounts for a considerable share of the country’s total registered MSMEs and a relatively low unemployment rate. The focus must now be on converting this potential into bankable projects. West Bengal has the capacity to build and attract investments.”

Talking about the true potential of India’s banking system, Mr CS Ghosh, Chairman, CII ER Banking Colloquium and Chairman, Bandhan Group, noted, “What we need is a banking system that actively enables financial growth. While the current geopolitical environment presents challenges, with pressure on the dollar and fluctuations in oil prices, the banking sector continues to grow. India’s economic growth has remained relatively strong despite global volatility.”

“Eastern India has historically been home to several major industries and has considerable strengths, including natural resources, industrial corridors, educational institutions, connectivity infrastructure, renewable energy, and manufacturing capabilities. We need to leverage these strengths more effectively. Deeper integration with domestic and global supply chains is essential. We must ask ourselves what Eastern India can manufacture and take to the world. The effective combination of technology and capital will be critical to achieving this vision,” he said.

“Eastern India has significant strengths in terms of connectivity, human capital and emerging opportunities. The challenge is to translate these strengths into enterprise development and, consequently, employment generation. There is a need to focus on improving the flow of capital into Eastern India,” opined Mr Bijay Murmuria, Chairman, CII ER Financial Services Subcommittee and Director, Sumedha Fiscal Services Ltd.

Mr Samir Agarwal, Co-Chairman, CII ER Financial Services Subcommittee and Director, Indcap Advisors Pvt Ltd, highlighted how banking must serve as an enabler of investment and economic growth, going beyond its traditional role of providing credit.

The CII 19th Banking Colloquium, held on Friday in Kolkata, witnessed participation from over 300 delegates. Under the theme ‘Banking Beyond Credit: Powering Eastern India’s Industrial Growth’, the event featured multiple engaging sessions with policymakers, regulators, bankers and industry leaders, focusing on the role of banking in driving industrial growth, improving capital flow, strengthening MSMEs and unlocking Eastern India’s economic potential.

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