Credit-Deposit Ratio : Reached Its Highest Level
Data from the Reserve Bank of India (RBI) reveals that the credit-deposit ratio has reached its highest level in at least 20 years.
- This surge in the credit-deposit ratio indicates that more of the banks’ deposit base is being utilized for loans, including home loans and other consumption-related loans.
- The credit-deposit ratio is a financial metric that measures the proportion of a bank’s deposit base that is used for lending.
- It is calculated by dividing the total loans extended by the bank by its total deposits.
- A higher ratio indicates that a larger portion of the bank’s deposits is being lent out as credit, while a lower ratio suggests more deposits are being held in reserve or invested in other assets.
- If a bank has a credit-deposit ratio of 80%, it means that 80% of its deposits are being used to provide loans.
- This ratio is crucial for assessing a bank’s liquidity and lending capacity.
