Credit-Deposit Ratio Crosses 80%: Causes and Impact
Why in the news
Lending outpaced deposits, pushing the ratio past what is often seen as the top of RBI’s comfort range.
Key facts
- CD ratio: loans as a share of deposits.
- Level: 80.21%; historically 75-80% is comfortable.
- Growth gap: credit 11.3% against deposits 9.7%.
| Rate type | Fresh | Outstanding |
|---|---|---|
| Lending rate fall | 58 bps | 55 bps |
| Term deposit rate fall | 106 bps | 22 bps |
Reasons for the rise
- Lower rates after a 100 bps repo cut, GST rationalisation, tax incentives and better demand.
- Large corporate borrowing and slow deposit mobilisation, partly as money moved to mutual funds.
Outlook
Small savings rates remain high; another repo cut expected 3-5 December may worsen deposit mobilisation.
Exam angle
- Formula: advances / deposits x 100.
- A high ratio means liquidity-crunch risk if deposits lag.