Credit Deposit Ratio 

Banks in India added more deposits than loans last year, leading to a softening of the credit-deposit ratio. 

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Key Points

• The Credit Deposit Ratio is the ratio of assets and liabilities of the banks.
• Credit Deposit Ratio: It is a financial metric used to assess a bank’s liquidity by comparing its total loans to total deposits for the same period.
• It indicates the percentage of deposits utilised for issuing loans.
• It helps in assessing a bank’s liquidity and indicates its health.
• High CDR: A higher CD ratio indicates that the loans disbursed are more than the deposits and vice versa, but there is also a higher risk if loan repayments are not met.
• If the ratio is too high, the lender does not have enough liquidity for any unforeseen fund requirements
• Low CDR: Suggests that the bank is more conservative, lending less and holding more reserves, which reflects caution or an inability to find suitable lending opportunities.