The formula to calculate the Cash Deposit Ratio is:
\[ \text{CDR} = \left(\frac{\text{CR}}{\text{TD}}\right) \times 100 \]
Where:
The cash deposit ratio (CDR) is a financial metric used to assess the liquidity of a bank or financial institution. It represents the proportion of a bank’s total deposits that are held in cash reserves. A higher cash deposit ratio indicates that a bank has a larger buffer of cash reserves relative to its total deposits, which can be crucial for meeting withdrawal demands and maintaining financial stability. Conversely, a lower cash deposit ratio may suggest that a bank has less liquidity, potentially increasing its risk during periods of financial stress.
Let's assume the following values:
Using the formula to calculate the Cash Deposit Ratio (CDR):
\[ \text{CDR} = \left(\frac{500,000}{2,000,000}\right) \times 100 = 25\% \]
The Cash Deposit Ratio is 25%.