BANKS GOING HIGH ON LOANS, LOW ON DEPOSITS

Banks are beginning to correct an expensive mistake they made during the downturn. More and more banks are saying `no’ to high-cost deposits they had raised to grab market share. And, finally, they have started doing what they are meant to do: give loans.
 Recent data show that the share of new loans to fresh deposits mobilised by banks has gone up sharply. What it signals is a growing reluctance among bankers to mobilise high-cost deposits. Interestingly, the rush for high-cost deposits began soon after the Lehman collapse in 2008.

According to RBI data, the ratio of fresh loans to fresh deposits, known as the incremental credit-deposit (CD) ratio in banking parlance, has gone up steadily in the past few months. The fortnightly trend in loans and deposits indicates that the incremental credit-deposit ratio has gone up sharply from 34.5% as of September 25 to 57% as of January 1.


Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Banks-going-high-on-loans-low-on-deposits/articleshow/5554367.cms