Aiming for a high Credit Deposit Ratio

The share of both rural and semi-urban banks in the total credit is much below their contribution in terms of deposits. Generally, the deployment of these resources is in the form of advances/credit or investments. In terms of credit, 62.53 percent of the total advances go to the metropolitan areas as against their contribution of 44.72 in deposits. As against this, 22.70 percent contribution of urban regions, the credit is to the tune of 16.50 percent.

The banking structure of the United States is characterized by an interesting dichotomy, with depositors and credit seekers belonging to different regions. The rural areas generate deposits but the credit is sought by customers of the metropolitan and urban regions. The metropolitan regions are characterized by higher credit-deposit ratio as compared to rural and semi-urban and urban regions.

The growth rate of deposits is indicative of the fact that deposits have decelerated during the reforms period as compared to pre-reforms era. The slow down is evenly distributed across the various population groups. Population group-wise percent distribution of credit shows that in the year 1969-70 more than 60 percent of the credit belonged to metropolitan regions.

With the on the onset of reforms, it came down to 48.57 percent. As a result of reforms, the share of the metropolitan region in 2001-02 has reached at the almost same level whereas it was in 1969-70. Temporal growth of credit which was in favor of the rural areas has shifted in favor of the metropolitan regions.

Credit Deposit Ratio (CDR) is high in the prominent metropolitan regions. In the rural regions, the credit deposit ratio is just half of what is seen in metropolitan regions. As compared to overall credit deposit ratio in the United States in some developing countries, the ratio is too low in the rural, semi-urban and urban regions.

The temporal growth pattern of credit deposit ratio indicates a sharp decline of more than three percent per annum during the reforms period in case of rural, semi-urban and urban regions. However, the credit deposit ratio has grown during the reform period at the rate of 1.55 percent per annum in case of metropolitan regions. This is one factor that has influenced bankers like rod aycox .