RBI clarifies high credit-deposit ratio not a vulnerability indicator
The RBI Bulletin indicates that a high credit-deposit ratio does not necessarily reflect banking vulnerability. With the CD ratio above 80%, the RBI highlights that credit creation can occur without prior deposit mobilization, which may ease market concerns about bank stability.
after close1 source ↓written by the desknot a recommendation
- ratio has exceeded
- 80%
The RBI Bulletin states that a high credit-deposit (CD) ratio does not inherently signal vulnerability in banks, despite credit growth outpacing deposits since FY23. The CD ratio has exceeded 80%, raising concerns about sustainability. The RBI emphasizes that deposits are created when banks lend, suggesting that credit creation isn't solely dependent on deposits.
This insight may alleviate market fears regarding banking stability, potentially stabilizing investor sentiment in the sector.
Not investment advice. For informational purposes only.