On Saturday, August 10, 2024, Finance Minister Nirmala Sitharaman requested banks to create creative schemes that would be attractive and encourage the depositors of their organization.
She mentioned after Reserve Bank India’s board meeting that the deposit and lending are like two wheels of a cart; however, “deposit is moving slowly.”
The minister added that core banking activities which comprise mobilizing deposits and funding people who were in need should be given first priority.
In this regard, she suggested that banks ought to develop “innovative and attractive” deposit schemes so as to mobilize funds from the public as well.
Sometimes by raising deposit rates, interest rates are deregulated hence banks tend to attract other financial facilities. “Banks have full discretion over their rates”, he concluded.
While delivering bi-monthly monetary policy earlier in the week, RBI governor Shaktikanta Das also expressed worry about deposit-lending mismatch in the banking sector.
According to him, there has been increased dependence on short-term non-retail deposits by commercial lenders and other liability instruments for incremental credit growth.
This situation can lead to “structural liquidity issues with potential implications for systemic risk.” So, rather than investing elsewhere or borrowing abroad for loanable funds they must increase their networks of branches to meet this additional demand for loans and save some of these Chinese savings.
