CREDIT TO DEPOSIT RATIO

A commonly used statistic for assessing a bank's liquidity by dividing the banks total loans by its total deposits. This number, also known as the LTD ratio, is expressed as a percentage. If the ratio is too high, it means that banks might not have enough liquidity to cover any unforseen fund requirements; if the ratio is too low, banks may not be earning as much as they could be
In 2008, the FDIC reported that statewide LTD ratios in the United States ranged from a low of 56% in Utah to a high of 170% in North Dakota. The statewide ratios compare all loans to all deposits for all banks with their home base in that state. These ratios are used to determine whether a bank will be allowed to open or acquire a branch outside of its home state, and this ratio is often used by policy makers to determine the lending practices of financial institutions.

CREDIT DEPOSIT RATIO OF ANDHRA PRADESH

Near double credit-deposit (CD) ratio, as compared to the Reserve Bank of India’s norm of 60 per cent, and the high overdues position in the agriculture sector in Andhra Pradesh have been the major concerns voiced by the bankers at the State-Level Bankers Committee (SLBC) meeting held here on Saturday.

The CD ratio in the state stood at 115.80 per cent with the incremental CD ratio touching 119 per cent as on December 31, 2001. The banks in the state have advanced Rs 3,69,048 crore, as compared to Rs 3,18,702 crore deposits raised during the same period.

“The issue of high CD ratio was discussed in the earlier meeting also. We need to make concerted efforts to improve the resource position and the government may also extend necessary help. Continued high CD ratio is not desirable since it may affect growth of robust credit portfolio,” BA Prabhakar, chairman and managing director of Andhra Bank, the convenor of SLBC, told the meeting.

Recovery of agriculture loans is also bothering the banking sector as the overdues under the agriculture sector are to the tune of 17.08 per cent, of which non-performing assets (NPAs) constitute 5.69 per cent.
Of the credit plan of Rs 73,316 crore approved for the current financial year, the banks could lend Rs 59,976 crore by December 2011, which is 81.80 per cent of the target . While the agriculture loan disbursements shown near complete achievement of the target of Rs 30,985 crore, the other priority sectors that include small and medium enterprises saw just 50.84 per cent disbursement out of the total credit target of Rs 17,118 crore.
Chief minister N Kiran Kumar Reddy, who chaired the meeting, expressed his displeasure over poor credit disbursements to small and medium enterprises in the state.
According to Andhra Ban chairman, the banks could cover only 7,786 units by March 10, 2012, as against the stipulated target of 15,000 units during 2011-12.