Credit-deposit ratio (CD ratio)

Credit-deposit ratio (CD ratio) is the ratio of how much a bank lends out of the deposits it has mobilized. This ratio conveys how much of each rupee of the deposit is going towards credit markets.

-Credit -Deposit Ratio = (Total bank credit)/Aggregate Deposits (Demand + Time Deposits).

• Higher growth in credit deposit ratio suggests credit growth is rising quickly, which could lead to excessive risks and leveraging on the borrowers side.