The Money That Never Comes Home

Last month, this newsletter followed the two-day journey of one farmer’s money. Ramprit Kumar of Samastipur had sold his paddy through the local cooperative, the payment had been approved, and yet his own money took the long road home through a chain of banking intermediaries, long enough that he had to borrow from a moneylender to pay his daughter’s school fees.

It turns out Ramprit’s story is one small chapter of a much bigger one.

Bihar’s banks currently hold about ₹5.69 lakh crore in deposits: savings from farmers, migrant workers, government employees, self-help group members, small traders. Of that, only around ₹3.04 lakh crore has been lent back out within the state. The difference, ₹2.65 lakh crore, has not vanished. It has left Bihar. It is financing homes, businesses, and factories somewhere else in India, while people in Muzaffarpur, Purnia, and Sitamarhi are told there isn’t enough credit to go around.

A Ratio That Explains a Lot
Economists have a simple tool for this: the credit-deposit ratio, or CD ratio: for every ₹100 a bank collects in deposits from a region, how much does it lend back into that same region? The Reserve Bank of India has long treated 60% as a reasonable floor.

Picture a village granary that every household fills through the year: grain set aside at harvest, meant to be drawn upon in the lean months before the next crop. Now imagine that the person holding the keys does not live in the village. He looks at the ledger and decides a bigger, better-connected village down the road is a safer place to lend the grain out: steadier incomes, cleaner records, easier collateral. So the grain travels there instead. When your own village runs short, you don’t get your grain back. You go to the local lender and pay a premium for it.
That, roughly, is what has happened to Bihar’s deposits for decades. As recently as 2011, Bihar’s CD ratio crossed 35% for the very first time in several decades, a figure the then-RBI Governor called a landmark, at a moment when the national average already stood above 70%. That single anecdote captures how far behind this conversation had been allowed to fall.

What Bihar Puts In, What Bihar Gets Back
The imbalance shows up starkly at the national level too. Bihar accounts for roughly 2.2% of all deposits in India’s banking system, but only about 0.87% of all credit disbursed nationally. For every ₹100 Bihar deposits into the system, it gets back less than ₹40 as credit within the state.

Set that against India’s more industrialised states. As of March 2025, Andhra Pradesh’s CD ratio stood above 150%, Telangana’s above 125%, Tamil Nadu’s above 125%, Maharashtra’s close to 100%. These states lend out more than they collect locally, drawing in savings from elsewhere, Bihar included, to fund their own growth.

Not One Bihar, But Many
State averages hide how uneven this is on the ground. As of March 2023, NABARD classified 28 of Bihar’s 38 districts as “credit deficient,” meaning less than ₹6,000 of formal credit is available per person, per year. That’s under ₹500 a month, for every economic need a household might have: seed for the next crop, a shop’s expansion, a daughter’s tuition, a roof repaired after a flood.

Twenty-two districts also fall short on priority-sector lending: credit specifically meant for farmers, artisans, and small enterprises. The geography is not random: the most credit-starved districts cluster in north and central Bihar, the belt most exposed to flooding and most dependent on agriculture. The places that can least afford credit scarcity are the places that live with it most.

When the Bank Says No
Bihar’s economy is still close to half agricultural, so agricultural credit isn’t a side issue; it’s close to the main one. And here the numbers turn genuinely strange. Between 2018-19 and 2022-23, Bihar’s total Ground Level Credit more than doubled, growing 101%. But inside that number, crop loans (the credit a farmer needs at the exact moment of sowing) fell by nearly a fifth, from ₹19,446 crore to ₹15,395 crore. The aggregate grew. The part that reaches a farmer’s hand in the sowing season shrank.

The Kisan Credit Card, the flagship instrument meant to fix exactly this, still reaches only about a quarter of Bihar’s cultivated land. For the other three-quarters, the alternative is well documented: Bihar has one of the country’s higher rates of dependence on private moneylenders, who charge a modal interest rate of around 36% a year, roughly nine times the effective rate on a KCC loan with prompt-repayment benefits, close to 4%. On a ₹50,000 loan taken for six months, that’s the difference between paying about ₹2,000 in interest and paying ₹9,000. Multiply that ₹7,000 gap across every season, across every excluded household (tens of millions of them), and a banking statistic starts to look like an engine of rural poverty: the season you can’t get formal credit is the season you become a little less creditworthy by the bank’s own criteria the year after.

It Isn’t Only Farmers
The same gap shows up in different clothes elsewhere. More than 97 lakh women in Bihar are members of Jeevika self-help groups, with real savings discipline and real repayment records, yet most can access only shared group loans, not the individual working-capital credit that would let one of them grow a business beyond what the group collectively decides to risk. Small traders and repair shops are registering in growing numbers, but the credit to fund a second stall or a bigger workshop rarely follows at the same pace. And for a graduate in Muzaffarpur with a food-processing idea, the calculation is simple and brutal: the banking infrastructure to fund her business exists, just in Bengaluru, in Pune, in Gurugram. It largely doesn’t exist at scale where she is. So she leaves too. Bihar doesn’t just lose a loan in these stories. It loses the borrower.

Why It Persists
None of this is any single institution’s doing. It’s the layered result of a few structural facts: land records tangled enough (disputed mutations, outdated entries) that banks discount Bihar’s land as collateral; a large informal economy that sits outside the paperwork formal underwriting expects; an industrial base largely lost to Jharkhand at bifurcation in 2000, leaving few large, easily bankable borrowers; and a loan officer whose incentives look the same in Patna as in Mumbai, where ten small loans to marginal farmers demand far more fieldwork than one large loan to a salaried borrower.

The First Cracks of Light
There is real movement here, and it deserves to be named. In May 2026, at a state-level banking review, officials announced that Bihar’s CD ratio had crossed 60% for the first time in the state’s history, up from 44.09% as recently as 2018-19. Non-performing assets at commercial banks in Bihar have fallen too, from 10.2% in 2020-21 to 6.0% in 2024-25, meaning the state’s banking risk, by the banks’ own measure, is genuinely improving. Under RBI’s priority-sector framework, fresh loans in Bihar’s most credit-starved districts now carry extra weight for banks that meet their targets there.

These are the right signals, moving in the right direction. What they are not, yet, is enough. Even past 60%, Bihar sits well below where a functioning credit market for a state its size should be, and every percentage point still unclosed represents thousands of crores that could have funded a shop, a tube well, or a small workshop inside Bihar this year, instead of somewhere else.

The Bigger Picture
NABARD estimates Bihar’s real credit potential, what its farms, small enterprises, and households could productively absorb, at over ₹2.43 lakh crore a year under existing RBI guidelines. If Bihar’s CD ratio simply matched the national average, roughly ₹1.26 lakh crore in additional credit would flow into the state annually, a sum close to the entire state budget, arriving not as a grant or a scheme, but as Bihar’s own money, finally allowed to work where it was saved.

Last month, we told you about the two days Ramprit Kumar’s money spent finding its way home. This is the larger version of the same story: money that, for millions of households like his, doesn’t take the long road home at all. It simply doesn’t come home.

Fixing that is not a matter of charity. It is Bihar’s own savings, asking to be trusted with Bihar’s own future.

Acknowledgement: With thanks to a Friend of Bihar, Mr. Satyam Kumar (B.Tech CS & AI, 3rd Year, Newton School of Technology, Rishihood University), for his assistance with data collection and research.