What is Credit-Deposit ratio for banks?
Jul 07, 11:07

The CD ratio refers to the credit-deposit ratio in banking parlance. It tells us how much of the money banks have raised in the form of deposits has been deployed as loans. So if the CD ratio for a single bank or the whole banking system stands at 75%, it means that three-fourths of the deposits with that bank or with the system has been given out as loans. A low CD ratio suggests relatively poor credit growth compared with deposit growth. A high CD ratio would mean strong demand for credit in an environment of relatively slower deposit growth. The CD ratio had slipped to historic lows of under 70% in late 2016, when demonetisation kept bankers busy exchanging banknotes and few new loans were given.

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