India's banking sector faces liquidity risks due to widening credit-deposit gap and decreasing dividend growth.

SP Global Market Intelligence warns that India's banking sector faces liquidity risks due to the credit-deposit gap caused by households shifting savings to investments. Banks' efforts to increase deposit rates erode net interest margins, leading to slower dividend payouts and tighter profitability. Dividend growth for major Indian banks is expected to decline from 27% in the previous fiscal year to 9% in 2024-25.