New Delhi: It’s election season in Bihar, and once again, all political parties are trying to woo voters through schemes and welfare programmes. However,
one of the major issues Bihar continues to grapple with is the mass migration of labour and skilled youth, as the state lacks the industrial and economic infrastructure needed to generate sufficient jobs for its population. Every election, political parties promise employment opportunities, yet the exodus of Bihar’s workforce persists. This election, Jan Suraaj founder Prashant Kishor has drawn attention to a critical structural reason behind the worsening migration crisis. According to him, if Bihar’s labour force is to stay, the inflow of capital and investments within the state must increase. He has put a spotlight on Bihar’s poor Credit-Deposit (CD) ratio, which he argues is a key barrier to local job creation and economic growth. In a recent interview, PK said, “It’s not just people migrating out of Bihar, but capital is also leaving the state. The CD ratio in Bihar is 40%. Because of this, every year around Rs 2 to Rs 2.5 lakh crore is transferred by banks to other states where industries are being set up. If the CD ratio is raised to the national average — that is, from 40% to 70% — then Rs 2 to Rs 2.5 lakh crore would become available within Bihar itself for generating employment." "Over the last 35 years, banks have transferred nearly Rs 25 lakh crore to other states. In the last financial year, Rs 4.21 lakh crore was deposited in banks in Bihar, but only Rs 1.61 lakh crore was given out as loans. To stop migration from Bihar, Jan Suraaj’s mantra is to increase capital availability. For this, the CD ratio must be improved in coordination with the banks,” he added. Also Read: Who Will Be Bihar’s Next CM If NDA Wins? Don’t Be Surprised If It’s Not Nitish Kumar To further simplfy this issue, let's first understand in simple terms what CD ratio is and how it impacts the state.
What is the CD Ratio?
The CD ratio indicates the proportion of loans given by banks in comparison to the deposits they receive. For example, if a bank has Rs 100 in deposits and it lends out Rs 70, then its CD ratio is 70%. It can also be seen as a measure of economic activity, because a higher CD ratio means banks are giving out more loans.
Bihar’s Low CD Ratio: A Drag on Growth
Based on recent data from the State Level Bankers’ Committee (SLBC) and other financial-studies, the credit-deposit (CD) ratio in Bihar continues to lag far behind the national average. As of March 31, 2025, Bihar’s CD ratio stood at 56.67%, as shown in state-wise data published by SLBC India. By comparison, the national average hovers around or above 75 %-80%.
In simple terms: for every Rs 100 deposited in Bihar’s banks, only about Rs 57 is being loaned out. The rest is effectively not being used to fuel local credit and investment.
Why It Matters
1.) Capital Outflow and Economic StagnationWith such a low CD ratio, a substantial portion of deposits in Bihar remains un-utilised locally and is instead transferred to more industrialised states where banks find viable credit opportunities. This means local businesses, farmers and entrepreneurs in Bihar face a liquidity shortfall, reducing investment, job creation and broader financial inclusion.
2.) Weakening Job Creation and Business Growth
Because banks are not advancing sufficient credit within Bihar, small and medium enterprises (MSMEs) find it harder to start or expand. New ventures or working-capital needs get under-served. The result: slower job creation, continued migration of labour out of the state and a reinforcing cycle of economic under-development.
3.) Structural Weaknesses in the Economy
The low CD ratio is both a symptom and a cause of Bihar’s economic structure. The state’s industrial base remains weak, business units are mostly smaller and fragmented, and large-scale credit demand is limited. Banks therefore face fewer firm-quality loan opportunities and remain risk-averse, further lowering lending.
Why the Ratio is So Low
Several interlinked factors contribute to Bihar’s low CD ratio:
- Limited credit demand: With fewer large industrial or commercial projects, demand for sizable bank loans is constrained.
- Bank risk-aversion & NPAs: Banks typically perceive higher risks in lending to smaller enterprises, agriculture or fragmented businesses, often associated with non-performing assets (NPAs).
- Information & collateral gaps: Many households or small units in Bihar lack strong collateral or proper credit histories — making them less viable borrowers from banks’ perspective.
- Economic structure: As noted earlier, a weak industrial ecosystem means fewer credit-worthy projects, limiting loan absorption even when deposits are available.
The Way Forward: Improving the CD Ratio
To break the cycle, Bihar needs coordinated efforts between the state government, banks and financial institutions:
- Credit outreach: Banks must actively pursue viable lending opportunities in MSMEs, agriculture, services and start-ups.
- Simplified processes & risk mitigation: Looser but prudent loan processes, better collateral frameworks and risk-sharing mechanisms might encourage banks to lend more.
- Economic transformation: Strengthening infrastructure, facilitating industry entry and boosting business ecosystems will create the demand side of credit.
- Financial inclusion & literacy: Increasing awareness and capacity of farmers, artisans and small business units to access credit can help convert idle deposits into productive loans.
Conclusion
Bihar’s CD ratio remains substantially below the national average, and that gap signals more than just a banking metric, it reflects the state’s challenge in mobilising capital for growth. Unless deposits are channelled into local lending and viable credit opportunities are expanded, the state risks perpetuating low growth, weak job creation and continued out-migration. Improving the CD ratio isn’t just a banking agenda — it’s central to Bihar’s economic revival.
