Are our banks lending more than they get as deposits

Indian banks are lending more than what they get as deposits — this is what was Reserve Bank of India (RBI) Governor Duvvuri Subbarao’s concern during the third quarterly review of the monetary policy.  The governor said the incremental credit-deposit (C/D) ratio of the banking sector was 102 per cent at the end of December 2010, up from 58 per cent in the corresponding period of the previous year.  Incremental C/D ratio indicates how much a bank has lent for every additional rupee it has received as deposit. Ideally, banks cannot lend, for example, more than Rs 70 for every Rs 100 they mobilised as deposits, because they need to set aside Rs 30 in the form of cash reserve ratio (CRR) and statutory liquidity ratio (SLR). But, RBI says, for every additional Rs 100 deposit, banks are lending Rs 102, even after meeting CRR and SLR obligations.