Loan-to-deposit Ratio 存贷比

Loan-to-deposit Ratio 存贷比

The loan-to-deposit ratio measures the proportion of a bank’s outstanding loans to its deposits. China’s central bank uses the ratio to regulate money supply and ensure banks have enough cash in reserve to deal with an unexpected surge in withdrawals. The ceiling on the loan-to-deposit ratio is set by law at 75 percent, meaning that banks cannot lend more than three-quarters of their deposits out. Critics have argued that the restriction creates more problems than it solves, but the regulator has stuck to it. However, it recently decided to adjust the way the ratio is calculated by broadening the scope of deposits to include other types of funds. This could encourage banks to lend more and ease capital pressure on companies, the regulator says.