REUTERS/Anindito Mukherjee/FilesMUMBAI, Sept 23 (Reuters) - Indian banks may be forced to compete harder to boost deposits amid tightening liquidity and rising credit demand ahead of the festive season, analysts warned. "We think the real challenge is the gap between deposit growth and loan growth, as deposit growth is weak, at 9.5% YoY – a good 600 bps below loan growth," said Suresh Ganapathy, head of financials research at Macquarie. "Borrowing from the market to fund credit growth is just one of the ways and after a while it isn't sustainable. Rates for bulk deposits, or deposits of over 20 million rupees, are rising more rapidly than retail, highlighting banks' focus on raising more funds quicker. The incremental credit deposit ratio has already crossed 100%, suggesting that banks have started lending more than the total deposits they hold.

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