Source: BS
Why in News?
The Reserve Bank of India (RBI), in its draft revised guidelines for the Lead Bank Scheme (LBS), has proposed that banks maintain a 60% credit-deposit (C/D) ratio for rural and semi-urban branches to improve credit flow and financial inclusion.
Key Proposal
- Banks must aim for a 60% C/D ratio in rural and semi-urban areas.
- Requirement is not mandatory at each branch or district level, but banks must avoid large regional disparities.
Monitoring Based on C/D Ratio
- 40%–60%: Monitored by the District Consultative Committee (DCC).
- Below 40% or declining credit: Special DCC sub-committee to create improvement plans.
- Below 20%: Classified as special category districts.
- State governments must improve infrastructure.
- Banks must increase lending.
- Progress closely monitored and reported.
Expansion of Banking Infrastructure
- Banks to prioritise opening core banking solution (CBS)-enabled outlets in Tier-V centres.
- At least 25% of new outlets must be in Tier-V and Tier-VI unbanked rural centres (URCs).
- Focus on unbanked villages with population above 5,000.
- State Level Bankers’ Committee (SLBC) convenor banks must maintain a list of all URCs.
Credit–Deposit Ratio (C/D Ratio)
Credit–Deposit Ratio (CDR) measures how much of the deposits collected by banks are used for lending. It is the percentage of total bank deposits that are given out as loans (credit).
Formula
Credit–Deposit Ratio = {Total Loans
