What it is
Banks lend out deposits. The credit to deposit (CD) ratio shows how much of the deposits have been lent: Rs 85 of loans for every Rs 100 of deposits is 85%.
NRB sets a ceiling of 90%, introduced in the FY 2078/79 monetary policy to replace the older CCD ratio (which counted core capital in the denominator). The cap keeps a liquidity buffer in the system.
A bank at 89% is 'tight': it cannot grow loans until deposits grow. A bank at 75% has spare lending room, but is earning less on its deposits.
How it is calculated
CD ratio (%) = Total loans and advances ÷ Total deposits × 100, as NRB defines the two totals.
Worked on Nabil Bank Limited, FY 2082/83 Q4
NABIL's credit to deposit ratio was 80.18% at the end of FY 2082/83 Q4: loans of about Rs 46,031.78 crore against deposits of about Rs 59,255.94 crore, under NRB's 90% ceiling.
What good looks like
Neither high nor low is 'good' on its own. Near 90% means growth is constrained and the bank may bid up deposit rates. Well below means spare liquidity and lower margins. The sector-wide ratio tells you whether credit is tight.
Watch out
- The exact definition (which loans and deposits count) is NRB's, so a quick balance-sheet division may not match the reported ratio.
- The limit has changed over time (CCD 80% → 85% → CD 90%); do not apply old limits.
- Banks near the ceiling sometimes slow lending at quarter end to comply.
In Nepal
Monetary Policy FY 2078/79 replaced the credit-to-core-capital-plus-deposit (CCD) ratio of 85% with a credit-to-deposit (CD) ratio capped at 90%. The FY 2079/80 first-quarter review kept the 90% ceiling and said fines for breaches would be reviewed against liquidity risk.
Questions
Depositors can withdraw at any time. NRB's 90% cap, plus the CRR and SLR, keeps enough money liquid to meet withdrawals.
No, it is within the limit. But it cannot grow loans much until deposits grow, which can squeeze its margin if it must pay more for deposits.