Loan-deposit ratio

Loan-deposit ratio, also known as the LTD ratio or LDR, is a ratio between the banks total loans and total deposits.

If the ratio is lower than one, the bank relied on its own deposits to make loans to its customers, without any outside borrowing. If on the other hand, the ratio is greater than one, the bank borrowed money which it reloaned at higher rates, rather than relying entirely on its own deposits. Banks may not be earning an optimal return if the ratio is too low. If the ratio is too high, the banks might not have enough liquidity to cover any unforeseen funding requirements or economic crises. It is a commonly used statistic for assessing a bank's liquidity.