Credit deposit Ratio

  • February 21, 2021
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
No Comments

 

 

Credit deposit Ratio

Subject: Economy

Context: At Niti Aayog’s governing council meet the Bihar CM requested the Centre to take steps to improve credit deposit ratio of the state.

Concept:

  • It is only 36.1 per cent in Bihar against the national average of the 76.5% (with some states having 100% Credit deposit ratio).
  • People deposited Rs 3.75 lakh crore in Bihar but banks extended loans up to Rs 1.35 lakh crore to its people.

About Credit Deposit Ratio

  • The CD ratio is the ratio of a bank’s total loans and total deposits.
  • Low credit to deposit ratio is an indicator of excess liquidity because of higher deposits with the banking system and the lack of alternatives in credit markets.
  • Under Reserve Bank of India rules, banks have to set aside 3% of deposits as cash reserve ratio (CRR) and another 18% in statutory liquidity ratio (SLR) compliant holdings. The rest, along with other resources, can be used for lending.
Credit deposit Ratio economy