The main objective of the study is to perform a comparative analysis of the Credit Deposit (CD) ratio of Scheduled Commercial Banks of the three major states of the western part of India, viz., Rajasthan, Gujarat and Maharashtra, and India as a whole as well as in consideration with a number of banks and per capita income of those states over the last 29 years (1977-2005). It is found that the behavior of CD ratio among all the three states is significantly different for the period of study. Maharashtra which is the backbone of growth and progress of Indian economy has been more volatile but performing well in terms of CD ratio, whereas Rajasthan and Gujarat are stable at lower level. There exists a lot of scope for branch expansion and improvement of service quality by the banks in Gujarat and Rajasthan.

Banks play a very vital role in the economic development of a country. Banks are essential for all types of economic systems whether they are developing or developed. No developing country can progress without setting a sound system of banking in the country. The basic function of the commercial banks is to mobilize the savings and to utilize them in productive investment. A bank is an institution, which deals in money and credit. Bank buys and sells money and credit. Sale of money means giving loans. Likewise, purchase of money means borrowing money from others. In both the situations, the price of the money is paid in the form of interest.

The main function of the commercial banks is to accept deposits from the public and providing loans. Banks require money for providing loans. Their share capital does not create sufficient money for providing loans. Therefore, banks accept deposits from persons or institutions and pay interest to the depositors. Persons or institutions deposit their surplus funds with banks for the purpose of earning interest and the safety of funds. Banks pay reasonable interest on the deposits. Banks grant loans from this amount and charge interest at a higher rate. The difference between the interest rates is the profit of the bank. Loans are generally granted to the traders, industrialists, farmers and self-employed persons. The total bank deposit amount is one of the indices that mirror the effectiveness with which the savings available with the public are mopped up by the financial intermediaries.

A Study of Credit Deposit Ratio in Selected States of Western India, deposits, interest, providing, Rajasthan, Gujarat, institutions, Maharashtra, developing, economic, savings, Credit, Deposit, backbone, depositors, behavior, effectiveness, farmers, generally, borrowing, industrialists, branch, intermediaries, mobilize