It makes sense to focus on the sectors where the money really goes. The new pension law will help put more money into long-term savings. Then, bank deposits have been seeing slower growth even as the money going into gold has trebled from 1% of GDP to 3%.

One result is that, over the past three years (till end-August), fresh loans have equalled 90% of new deposits. That is an unsustainable ratio when the Reserve Bank of India's reserve requirements should leave banks with no more than 73% of new deposits for giving out as new loans.

Conclusion: the demand for fresh credit is outstripping the inflow of deposits that can be lent out. Read More