Economics • Banking & FinanceHard
In evaluating the credit-deposit ratio of commercial banks in Punjab, what does a significantly lower ratio compared to the national average typically indicate about capital utilization?
A. A high volume of local deposits is mobilized within the state but channeled outward as credit to finance investments elsewhere✓ Correct Answer
B. Banks in Punjab refuse to accept savings accounts from local residents
C. The state government prohibits commercial banks from lending money to local businesses
D. All banking transactions in Punjab are conducted exclusively in physical gold bullion
💡 Solution & Explanation
A low credit-deposit ratio in an agrarian state often reveals that funds mobilized through rural deposits are utilized by banking networks to extend credit in corporate and industrial centers outside the state. Commercial banks actively accept savings accounts across Punjab. No state law prohibits lending to local businesses. Physical gold bullion forms a minor component of retail banking reserves.
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