Credit deposit Ratio
- February 21, 2021
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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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.