Project Report On

kkkkkk
A study on variations of Credit Deposit Ratio among regions
of India
Faculty of Management Studies

Course name: - Macroeconomics and Business Environment

Course code- INM552
Guided by: - Dr. Dipangshu Dev Chowdhury

Submitted to: - Submitted by: -

Name-Dr. Dipangshu Dev Name- Rajdip Mazumder,
Chowdhury,
ID- 18IUT0160004
Designation-Assistant Professor,
Program –MBA 1ST YEAR
Deptt.: -Faculty of Management
Session-2018-20
Studies,
ICFAI University, Tripura
ICFAI University, Tripura
 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to Dr. Dipangshu Dev

Chowdhury who gave me the golden opportunity to do this wonderful project on
“A study on the analysis of variation of Credit Deposit Ratio among various
regions of India”, which has helped me to learn so many new things about the
topic and I am really thankful for that.
Secondly I would also like to thank the God, my parents and friends
who helped me a lot directly or indirectly in completing and finalizing this report
within the limited time period.

Date- Yours Faithfully,

Place- Rajdip Mazumder
ID No.-18IUT0160004
Program-MBA 1st yr (2nd sem)
 Table of Content

Sl No. HEADINGS Page No.

1 INTRODUCTION

4 OBJECTIVES

5 METHODOLOGY

6 FINDINGS & ANALYSIS

7 CONCLUSION

8 REFERENCE
 INTRODUCTION
Cash Deposit ratio (CDR) is the ratio of how much a bank lends out of the deposits it has
mobilised. It indicates how much of a bank’s core funds are being used for lending, the main
banking activity. It can also be defined as total of Cash in hand and Balances with RBI divided
by Total deposits. The loan-to-deposit ratio (LDR) which is also known as CDR is used to
assess a bank's liquidity by comparing a bank's total loans to its total deposits for the same
period. The LDR is expressed as a percentage. If the ratio is too high, it means that the bank
may not have enough liquidity to cover any unforeseen fund requirements. Conversely, if the
ratio is too low, the bank may not be earning as much as it could be.

Importance of CDR

A loan-to-deposit ratio shows a bank's ability to cover loan losses and withdrawals by its
customers. Investors monitor the LDR of banks to make sure there's adequate liquidity to cover
loans in the event of an economic downturn resulting in loan defaults.

Also, the LDR helps to show how well a bank is attracting and retaining customers. If a bank's
deposits are increasing, new money and new clients are being on-boarded. As a result, the bank
will likely have more money to lend, which should increase earnings. Although it's
counterintuitive, loans are an asset for a bank since banks earn interest income from lending.
Deposits, on the other hand, are liabilities because banks must pay an interest rate on those
deposits, albeit at a low rate.

The LDR can help investors determine if a bank is managed properly. If the bank isn't
increasing its deposits or its deposits are shrinking, the bank will have less money to lend. In
some cases, banks will borrow money to satisfy its loan demand in an attempt to boost interest
income. However, if a bank is using debt to finance its lending operations instead of deposits,
the bank will have debt servicing costs since it will need to pay interest on the debt.

As a result, a bank that borrows money to lend to its customers will typically have lower profit
margins and more debt. A bank would rather use deposits to lend since the interest rates paid
to depositors are far lower than the rates it would be charged for borrowing money. The LDR
helps investors spot the banks that have enough deposits on hand to lend and won't need to
resort to increasing their debt.

The proper LDR is a delicate balance for banks. If banks lend too much of their deposits, they
might overextend themselves, particularly in an economic downturn. However, if banks lend
too few of their deposits, they might have opportunity cost since their deposits would be sitting
on their balance sheets earning no revenue. Banks with low LTD ratios might have lower
interest income resulting in lower earnings.

The ideal loan-to-deposit ratio is 80% to 90%. A loan-to-deposit ratio of 100% means a bank
loaned one dollar to customers for every dollar received in deposits it received. It also means a
bank will not have significant reserves available for expected or unexpected contingencies.
 OBJECTIVE OF THE STUDY

Broad Objective-
 METHODOLOGY

1. Primary Data: -

Primary data is data that is collected by a researcher from first-hand sources,

using methods like surveys, interviews, or experiments. It is collected with the research project
in mind, directly from primary sources. Example- directly interviewing the person,
questionnaire, scheduling, etc.

2. Secondary Data: -
These are the data which are collected from some secondary source i.e. the
source of reservation storage where the data is collected by one person and used by other
agency. These are collected as primary data and used by other as secondary data. Example-
internet, books, magazines, etc.
 The data collected for the research is from Secondary sources.
 Data Source is RBI annual report 2018.

Calculation of Cash Deposit Ratio

1. To calculate the loan-to-deposit ratio, divide a bank's total amount of loans by the
total amount of deposits for the same period.
2. You can find the figures on a bank's balance sheet. Loans are listed as assets while
deposits are listed as liabilities.
 DATA ANALYSIS AND INTERPRETATIONS

TABLE 129: REGION-WISE CREDIT-DEPOSIT RATIO OF REGIONAL RURAL BANKS

(As at end-March) (Concld.)

(Per cent)

Regions/States/Union 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Territories

NORTHERN 59.4 65.5 65.7 66.8 67.3 68.6 70.4 71.8 65.6 68.3
REGION

NORTH-EASTERN 44.5 44.1 45.1 46.8 49.4 49.2 47.4 49.4 45.4 43.8
REGION

EASTERN REGION 41.8 42.8 45.5 48.9 50.8 53.1 53.4 50.7 47.3 47.8

CENTRAL 46.2 46.7 46.7 50.6 51.6 54.9 56.5 57.5 53.0 52.8
REGION

WESTERN 49.7 49.0 48.7 52.9 60.6 62.0 62.4 65.8 63.0 59.3
REGION

SOUTHERN 91.6 95.0 96.6 102.9 105.8 104.8 98.8 92.3 87.2 96.4
REGION

Sum 333.2 343.1 348.3 368.9 385.5 392.6 388.9 387.5 361.5 368.4

No of Observation 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0

Mean 55.53 57.18 58.05 61.48 64.25 65.43 64.82 64.58 60.25 61.40

Standard Deviation 18.69 20.27 20.43 21.49 21.50 20.48 18.41 16.09 15.51 19.21

CV 33.66 35.45 35.19 34.96 33.46 31.31 28.40 24.92 25.75 31.29

Source: Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks, RBI,
various issues.
 Table 1

Regions/States/Union
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Territories

NORTHERN REGION 59.4 65.5 65.7 66.8 67.3 68.6 70.4 71.8 65.6 68.3

Graph1

CDR OF NORTH-EASTERN REGION

49.4
49.2
49.4

47.4
46.8

45.4
45.1
44.5

44.1

43.8
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

INTERPRETATION: -- In the above graph, it can be clearly seen that the cash deposit ratio was initially
very less, which kept on increasing till 2013 and after that there was again a decline till 2015 and again it
has been found going up in 2016 and finally it gradually came down in 2018. SO, by the graph shown
above, with the help of trend line, it can be said that overall there was an increase in CDR in the North-
Eastern Region.
 Table 2

Regions/States/Union
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Territories

NORTH-EASTERN
REGION
44.5 44.1 45.1 46.8 49.4 49.2 47.4 49.4 45.4 43.8

Graph 2

CDR OF NORTHERN REGION

71.8

65.6
70.4
68.6

68.3
67.3
66.8
65.7
65.5
59.4

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

INTERPRETATION: -
 Table 3

Regions/States/Union
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Territories

EASTERN REGION 41.8 42.8 45.5 48.9 50.8 53.1 53.4 50.7 47.3 47.8

Graph 3

CDR OF EASTERN REGION

53.4
53.1

47.3
50.8

50.7
48.9

47.8
42.8

45.5
41.8

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

INTERPRETATION: -
 Table 4

Regions/States/Union
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Territories

CENTRAL REGION 46.2 46.7 46.7 50.6 51.6 54.9 56.5 57.5 53.0 52.8

Graph 4

CDR OF CENTRAL REGION

57.5

53.0
56.5
54.9
46.7

52.8
51.6
50.6
46.7
46.2

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

INTERPRETATION: -
 Table 5

Regions/States/Union
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Territories

WESTERN
49.7 49.0 48.7 52.9 60.6 62.0 62.4 65.8 63.0 59.3
REGION

Graph 5

CDR OF WESTERN REGION

65.8

63.0
62.4
62.0
60.6

59.3
52.9
49.7

48.7
49.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

INTERPRETATION: -
 Table 6

Regions/States/Union
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Territories

SOUTHERN REGION 91.6 95.0 96.6 102.9 105.8 104.8 98.8 92.3 87.2 96.4

Graph 6

CDR OF SOUTHERN REGION

105.8

104.8
102.9

98.8
96.6

96.4
92.3
91.6

95

87.2

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

INTERPRETATION: -
 Hypothesis of the study

Hypothesis1: H0= There is not any significant variations of CDR of a

particular region over the 10 years.

Hypothesis2: H0= There is not any significant variations of CDR across

different regions on a particular year.
 ANNOVA TEST OF CDR OF VARIOUS REGIONS

ANOVA
Source of SS df MS F P-value F crit
Variation
Rows 340117.8 22 15459.9 64.88161 2.8E- 1.559453
144
Columns 81884.48 28 2924.446 12.27322 4.16E- 1.494682
43
Error 146779.6 616 238.2786

Total 568781.9 666

INTERPRETATIONS: -
 CONCLUSION
It can thus be concluded that