Loan-to-deposit ratio, that is, the total amount of bank loans/deposits, from the perspective of bank profitability, the higher the loan-to-deposit ratio, the better, because deposits have to pay interest, which is the so-called cost of capital. If banks have more deposits and less loans, it means high costs, low returns and poor profitability. Banks aim at making profits, so they will try to improve the loan-to-deposit ratio case.
But it's like two sides of a coin. From the perspective of bank's anti-risk, the case of loan-to-deposit ratio should not be too high, because banks need to maintain a certain cash deposit reserve to handle customers' daily cash withdrawal and daily settlement. If the loan-to-deposit ratio is too high, this part of the funds will be insufficient, leading to the payment crisis of the bank. If the payment crisis spreads, it may lead to a financial crisis and cause great harm to the regional or national economy. Bankruptcy due to payment crisis (of course, this situation has not happened in China at present, and it is very common in foreign banks) will harm the interests of depositors. Therefore, the higher the loan-to-deposit ratio, the better. There should be a degree. In order to prevent excessive expansion of banks, the central bank currently stipulates that the highest loan-to-deposit ratio for commercial banks is 75%.
At present, many domestic commercial banks have approached or even exceeded 75% of high-voltage lines. For example, according to the annual report of SDB, by the end of 2009, the bank's loan-to-deposit ratio was as high as 79. 148%, exceeding the regulatory line of 75% in loan-to-deposit ratio. In addition, the Industrial Bank is 78%.