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Informist, Saturday, Aug 10, 2024

 

--Sitharaman: Banks should take steps to make deposits attractive 
--Sitharaman: Banks should collect deposits in old-fashioned way 
--Sitharaman: Banks need to balance credit-deposit growth 
--CONTEXT: Sitharaman, RBI Das brief media following post-Budget meet 
--Sitharaman: RBI, govt asking banks to focus on core businesses 

--RBI Das: See overall stability in fincl sector interest rate regime 
--RBI Das: It is for banks to take call on deposit rates 

 

NEW DELHI – Banks need to establish a healthy balance between the growth rate in their credit disbursal with that of their deposit collections, Finance Minister Nirmala Sitharaman said today. Currently, deposits are growing slower than loan disbursal, Sitharaman added. 

 

"Both the Reserve Bank of India and the government are encouraging banks to focus more on their core business activity," Sitharaman told the media at a joint press conference with RBI Governor Shaktikanta Das after meeting the central bank board. The finance minister and the RBI Board held a customary post-Budget meeting today in New Delhi.

 

"We have been witnessing about 300 to 400 basis points gap between deposits and credit growth, deposits are lower," Governor Das said. "So at the moment, our effort is to highlight this point. It is kind of a proactive cautioning for the banks' management that going forward, this may create structural issues with regard to liquidity management."

 

"As it stands today, we don't see a crisis," Das said. "But it has to be attended." 

 

Sitharaman said she will meet bankers soon and tell them to go back to collecting deposits the old-fashioned way. "RBI has given them (banks) some liberty in managing the interest rates, using that liberty they should make deposit more attractive."

 

Recently, households have been mobilising their savings into capital markets, instead of traditional instruments like bank deposits and small savings schemes. About 20% of Indian households are now channelling their savings into financial markets. "Banks should also bring innovative portfolios and make deposits more attractive," Sitharaman said. 

 

The net financial household savings have declined due to the surge in retail investment in the capital markets, Sitharaman had said in Parliament. The registered investor base at the National Stock Exchange has nearly tripled to 9.2 mln as of Mar 31 from March 2020, as per the Economic Survey for 2023-24 (Apr-Mar). 

 

"The credit rate and the deposit rates are completely deregulated, so it depends on the banks to take a call on their deposit rates," Das said. "There has been a considerable amount of stability in our interest rate regime, not just in regard to the central bank but the overall financial sector."  End

 

Reported by Sagar Sen

Written by Krity Ambey

Edited by Akul Nishant Akhoury

 

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