Credit-Deposit RatioCD ratio
How hard the balance sheet is working — advances as a share of deposits, and a liquidity flag.
Why you care
The CD ratio — advances ÷ deposits — is a one-glance read on how hard the balance sheet is working. Too low and the bank is lazy, parking money instead of lending it. Too high and it's stretched, funding loans faster than deposits can support. It's a favourite RBI and analyst flag.
Run the numbers
₹78 cr of loans on ₹100 cr of deposits = a 78% CD ratio (illustrative). The sector runs around 80%. Climbing well past that means lending is outpacing deposits — a sign the bank will soon have to fight harder (and pay more) for funds.
Where this goes
The CD ratio is the meeting point of credit growth and deposit growth: it rises when lending outruns funding. It can't run to 100% — SLR and CRR lock away a chunk of every deposit — and it's a standing item when you read the results.
Why you care
The credit-deposit (CD) ratio is a bank's total advances divided by its total deposits — how much of the money it has raised is actually out working as loans. It's the simplest gauge of how hard a balance sheet is being pushed.
Read it as a dial with a wrong answer at both ends. A low CD ratio (say 65%) means the bank is sitting on deposits it isn't lending — safe, but lazy, and leaving margin on the table. A high CD ratio (say 85%+) means the bank is lending nearly everything it raises. That's efficient, but it leaves a thin liquidity cushion and forces the bank to keep chasing deposits to fund more loans. That's why the CD ratio doubles as a liquidity flag: a bank running hot on this number is one deposit-war away from a funding squeeze. It's one of the fastest reads on whether growth is healthy or over-stretched.
Run the numbers
A bank with ₹78 crore of advances and ₹100 crore of deposits (illustrative):
- CD ratio = 78 / 100 = 78%
For context, the Indian banking system runs around ~80%. Now watch it move: if credit growth runs at 15% while deposit growth manages only 10%, next year's ratio climbs toward ~82%. The bank then has to either slow lending or pay up for deposits to keep funding it.
One thing the ratio can never do is reach 100%. A bank can't lend every rupee of deposits, because SLR and CRR force roughly 21% of every deposit into government bonds and idle cash before any lending happens. So even a fully-loaded balance sheet tops out well short of 100%, and the practical ceiling is lower still once you hold a liquidity buffer for stress (the role the Liquidity Coverage Ratio plays).
Where this goes
The CD ratio is where credit growth and deposit growth net out: it climbs whenever lending outpaces funding. A stretched ratio is an early warning that the bank's next problem is liquidity, not loans. It sits against the regulatory floor set by SLR and CRR, and it's a standing line when you read a bank's results.