NEW DELHI: Reserve Bank of India Governor Shaktikanta Das has asked banks to remain a watchful eye on the emerging global macroeconomic situations and be cautious of the possible spillover effect of a likely global slowdown.
The governor on Wednesday met the heads of the public sector and certain private sector banks to discuss various macroeconomic and sector-related issues. With the slowdown looming over the global economy, the RBI governor exhorted the heads of the banks to proactively take mitigating measures so that ‘the potential impact on their balance sheets is minimised and financial stability risks are contained’.
The meeting also discussed the lagging growth in deposits compared to credit growth. Bank credit growth has been outpacing the deposit growth over many quarters raising concern of an impending liquidity crunch if banks fail to attract deposits at a faster pace. Year-on-year credit growth accelerated to 14.2% in the June quarter compared to 9-10% growth in deposits. In October, credit off-take surged to 17.9% compared to 9.5% growth in deposits.
The banks have been slow in the transmission of repo rate hikes to deposit rates as a result of which term deposit rates are still languishing below 7% while lending rates have gone above 9%. The Reserve Bank of India (RBI) has increased the loan rates by 190 basis points since May this year.
While banks have fully passed on the impact of a repo rate hike to borrowers, they have been slow in passing on the benefit to depositors. For example, SBI in a recent analyst call said that they have hiked deposit rates by only 80 basis points since May 2022.
Other matters that were discussed during the meeting include asset quality, investments in IT infrastructure, adoption of new-age technology solutions, functioning of digital banking units, etc.