The Credit-Deposit Ratio – Time for a Re-Think?

• by Y S P Thorat and Graham Wright
• Apr 30, 2007
• 1 min
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This note provides a critique of CDR as a yardstick of measuring bank commitments for serving the poor, instead it suggests to develop an alternative measure that calculates credit as per utilisation

The Reserve Bank of India (RBI) issued an advisory note to Pubic Sector Banks (PSBs) for maintaining a Credit to Deposit ratio (CDR) of 60% in rural and semi urban branches continuously to reduce inter-regional imbalances in credit delivery. This note provides a critique of CDR as a yardstick of measuring bank commitments for serving the poor, instead it suggests to develop an alternative measure that calculates credit as per utilisation, which gives a far better picture of credit usage. It also proposes to build enabling environment for utilising the vast banking network in India, which provide unique opportunity to achieve the MDGs.