• Credit-Deposit (C-D) Ratio is a key banking metric that shows the percentage of a bank's deposits that have been utilized for lending.
• A higher C-D ratio implies aggressive lending, while a lower ratio suggests lower credit disbursement relative to deposits.
Comparative C-D Ratios of Different Banks:
1) Private Sector Banks (PVBs) → Highest C-D Ratio:
• PVBs, particularly new-generation banks, focus on high lending growth in retail and corporate sectors.
• Their aggressive credit expansion results in a higher C-D ratio compared to PSBs and RRBs.
2) Public Sector Banks (PSBs) → Moderate C-D Ratio:
• While PSBs have large deposit bases, they are more conservative in lending.
• Their C-D ratio is lower than PVBs but higher than RRBs.
3) Regional Rural Banks (RRBs) → Lowest C-D Ratio:
• RRBs primarily lend in rural areas, focusing on agriculture and small businesses.
• They maintain a low-risk lending strategy, leading to a lower C-D ratio.
4) Foreign Banks (FBs) → Varied C-D Ratio:
• Foreign banks in India focus on corporate and wholesale banking rather than retail lending.
• Their C-D ratio is not as high as PVBs but higher than RRBs and cooperative banks.
5) Cooperative Banks → Low C-D Ratio:
• Cooperative banks operate mainly in local and semi-urban areas with limited credit expansion.
• Their C-D ratio remains lower than commercial banks.
Study Notes
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