NEW DELHI:The widening gap between the deposit growth and loan growth has been increasingly posing challenges to the banks sending the lenders hunting for more deposits.
Even as the Reserve Bank of India (RBI) has red-flagged this issue time and again, the Finance Minister Nirmala Sitharaman has also urged banks on Saturday to develop innovative and appealing schemes to boost deposit mobilization.
Speaking to the media after the Reserve Bank of India’s board meeting, she emphasized that deposits and lending are the two essential components of banking, noting that deposit growth is currently lagging.
Need innovative schemes
Sitharaman highlighted the need for banks to concentrate on their core banking activities, particularly the mobilisation of deposits and providing loans to those in need.
To address the imbalance between deposits and lending, she called on banks to introduce “innovative and attractive” deposit schemes to encourage people to invest their funds.
Growing mismatch
RBI Governor Shaktikanta Das echoed these concerns, noting that interest rates are deregulated, and banks often increase deposit rates to attract more funds. He emphasised that banks have the freedom to set their interest rates as needed.
Earlier in the week, while announcing the bi-monthly monetary policy, Das had expressed concern about the growing mismatch between deposits and lending in the banking sector.
He pointed out that banks were increasingly relying on short-term non-retail deposits and other liability instruments to meet the rising credit demand, which could lead to structural liquidity challenges.
Das advised banks to focus on mobilizing household financial savings through innovative products and services, taking full advantage of their extensive branch networks.
