The IUP Journal of Bank Management
Credit-Deposit Ratio of Scheduled Commercial Banks in Odisha: Issues and Challenges

Article Details
Pub. Date : Feb, 2022
Product Name : The IUP Journal of Bank Management
Product Type : Article
Product Code : IJBM30222
Author Name : Rasmi Ranjan Behera
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 20



Banking penetration has increased considerably in the last 15 years in Odisha, which is reflected in increasing bank branch density, per capita deposits/credit and double-digit growth in credit. However, Odisha still lags behind the national average in many banking development indicators such as Credit-Deposit (CD) ratio and credit/GSDP ratio. The lower and downward movement in CD ratio over the years has been raising questions on the role of banks in meeting the potential credit needs of the state economy. The present paper makes an attempt to explain the possible causes for the persistent low CD ratio of Scheduled Commercial Banks (SCBs) in the state. The CD ratio, being a product of the ratio of credit disbursement to deposit mobilization, has remained lower primarily due to much higher growth in deposits than the credit. The paper found that higher gross non-performing assets in banks, coupled with lower per capita income, physical infrastructure deficits and higher proportion of unorganized sector, pose challenges to the banking sector for higher credit flow. Further, comparatively less and skewed banking network and lack of big private investment by industry hinders higher credit demand prospects. An uptick in the CD ratio has been observed in recent years. The empirical evidence of a positive effect of credit on the state economy growth warrants higher credit flow from banks to achieve full potential output of the state. The paper focuses on the regional aspect of bank credit growth in India.


Financial development plays a significant role in fostering the economic growth of a region by partly reducing the cost of external finance to financially dependent firms (Rajan and Zingales, 1998). The Indian financial sector is largely dominated by commercial banks with a credit intensity measured by bank credit/GDP ratio of 56.1% in 2020-21. The Reserve Bank of India (RBI) has been continuously focusing on strengthening the credit delivery mechanisms to ensure adequate and timely flow of credit to all productive sectors of the economy and also the availability of banking services to all sections of the society (RBI, 2021). In order to minimiz