Module: General Practice
Q47: What target Credit Deposit Ratio does the Reserve Bank of India require banks to achieve for their rural and semi-urban branches on an all-India basis?
✅ Correct Answer: C
The correct answer is 60 percent.
Banks do not have to reach this target number for each single branch or each district on its own.
However, banks must make sure there are no huge differences between different regions.
To check this, the ratio looks at the loan money based on the place where it is actually used.
At the main office level of the bank and the state level, the measurement includes the used loan money plus the money from the Rural Infrastructure Development Fund.
At the local district level, the measurement only looks at the used loan money.
Banks do not have to reach this target number for each single branch or each district on its own.
However, banks must make sure there are no huge differences between different regions.
To check this, the ratio looks at the loan money based on the place where it is actually used.
At the main office level of the bank and the state level, the measurement includes the used loan money plus the money from the Rural Infrastructure Development Fund.
At the local district level, the measurement only looks at the used loan money.
🧠 Real-World Scenario:
Imagine a bank branch in a small farming village collects 10 Lakh Rupees in savings deposits from the locals. Suddenly, the branch manager wants to send all 10 Lakhs back to the big city headquarters to fund corporate loans.
According to the rules, they can be stopped by the RBI, because the CD ratio demands they lend out at least 60% (6 Lakhs) locally. This means rural savings cannot be drained to build cities; the money must help the village grow.