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Informist, Wednesday, Aug 28, 2024

--SBI Tewari: Bks trying new fund avenues on deposit-credit growth gap

--SBI Tewari: Regulators telling us retail deposits are way to go

--SBI Tewari: Correction in equity mkts will bring funds back to bks

--SBI Tewari: RBI move on risky segments aimed at slowing credit growth

--SBI Tewari: Bulk of tech spend going into resilience, cybersecurity

--SBI Tewari: Need more invest in core banking to tackle rising volumes

--YES Bk MD: Digitalising all banking ops both a challenge, possibility

--YES Bk MD: Bks must prepare to support over 1 bln UPI transactions/day

--YES Bk MD: Ensuring no failure in large transaction volume a challenge

 

MUMBAI – Indian banks are exploring new avenues to fund the deposit-credit growth gap, State Bank of India Managing Director Ashwini Kumar Tewari said today.

 

At the announcement of the latest Monetary Policy Committee meeting outcome on Aug 8, RBI Governor Shaktikanta Das had emphasised the need for banks to focus on mobilising household financial savings through innovative products and services.

 

"Bulk deposits are inherently unstable, it's a function of interest rates and can go away very quickly so therefore retail deposits which are far more stable is the way to go, that's what the regulator is telling us," Tewari said at Global Fintech Fest.

 

In the past few months, top RBI officials on several occasions have flagged the risk that India's banking sector could face significant liquidity risks owing to the widening credit-deposit gap, which is driven by households shifting their savings to other higher-yielding financial assets.

 

Tewari said that any sharp correction in equity markets may lead to a reversal of funds back to banks.

 

As per latest data, banks' loan book growth remains higher than that of bank deposits. Bank deposits grew 10.9% on year to 213.28 trln rupees as of Aug 9, compared with loan book growth of 13.6% on year.

 

He further said the recent RBI's regulatory measures of higher risk weight of unsecured, personal loans also aimed at slowing credit growth.

 

Most banks have raised their deposit rates amid rising competition and are increasingly relying on bulk term deposits and certificates of deposit to fund their asset growth.

 

From Apr 1 to Aug 20, CD issuances amounted to 3.77 trln rupees, almost 66% higher as compared to 2.28 trln rupees issuances in the corresponding period in the previous fiscal year.

 

Banks, especially state-owned banks, have tapped the infrastructure bonds route recently to raise funds. SBI has raised 200 bln rupees in two tranches through 15-year infrastructure bonds in Jun-Jul.

 

Bank of Baroda, Canara Bank, and Bank of India also raised funds through infrastructure bonds.  More

 

Tewari said that Indian banks need to invest more in core banking solutions to tackle rising volumes. Currently, a bulk of spending on technology is going into boosting resilience and cybersecurity.

 

Speaking at the same event, YES Bank’s Managing Director and Chief Executive Officer Prashant Kumar said digitalising all banking operations is both a challenge and a possibility also.

 

Kumar said Indian banks must prepare to support over 1 bln UPI transactions per day and ensuring no failure in large transaction volume a major challenge.    End

 

Reported by Kabir Sharma and Sachi Pande

Written by Richard Fargose

Edited by Akul Nishant Akhoury

 

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