We provide evidence that the deposit franchise of privately owned banks is driven by their deposit market concentration while state owned banks derive their franchise value from government guarantees. Using the boom period of the 2000s in India as a laboratory, when monetary policy tightened precipitously, we document that banks with stronger deposit franchises significantly increased exposure to the infrastructure sector, at the expense of investing in marked-to-market government securities. Subsequently, these banks have higher non-performing loans. This highlights an important trade-off between mark-to-market and default risk for banks, particularly in economies with incomplete asset markets and significant state guarantees for banking assets.