What is CDR

CDR stands for Cash Deposit Ratio, which is a measure used in finance to analyze the amount of cash that a bank holds in relation to its total deposit liabilities. The CDR is calculated by dividing the total cash reserves by the total deposit liabilities. It is used to assess the liquidity and solvency of a bank, as well as its ability to meet the demands of its depositors. The CDR is an important metric for banks and financial institutions as it provides insight into their ability to meet withdrawal requests and other obligations. A higher CDR indicates that a bank has a larger cash reserve relative to its deposit liabilities, which may be seen as a sign of financial strength and stability. On the other hand, a lower CDR may indicate a higher risk of liquidity problems and potential insolvency. Regulators and investors use the CDR as a key indicator of a bank's financial health and risk profile. It is also used to benchmark and compare the liquidity positions of different banks within the industry. Additionally, the CDR can be used as a tool for risk management and strategic decision-making within financial institutions. Overall, the CDR is an important measure in finance that provides valuable insights into the liquidity and solvency of banks and financial institutions, and plays a crucial role in assessing their financial stability and risk management capabilities.