Explanation:

The currency deposit ratio (CDR) is the ratio of money held by the public in currency to that they hold in bank deposits.

CDR = CU/DD, where CU is currency (notes plus coins) held by public and DD is net demand deposits held by commercial banks. The word 'net' implies that only deposits of the public held by the banks are to be included in the money supply. The inter bank deposits, which a commercial banks holds in other commercial banks, are not to be regarded as part of money supply.

CDR reflects people's preference for liquidity. It is a purely behavioral parameter which depends, among other things, on the seasonal pattern of expenditure. CDR increases during the festive season as people convert deposits to cash balance for meeting extra expenditure during such periods