NEW DELHI: The slow growth in bank deposits again came up for discussion as finance minister Nirmala Sitharaman raised the issue with the chief of public sector banks (PSBs) during a review meeting in New Delhi on Monday. During the meeting, she emphasised the importance of boosting their deposit growth.
As per banking sources, the FM urged bank leaders to focus on core banking operations and enhance deposit by launching innovative products. During the meeting, Sitharaman evaluated the banks’ financial performance and the advancement of key government initiatives such as PM Awas Yojana, PM Surya Ghar, and PM Vishwakarma Yojana. She also examined deposit growth, the credit-to-deposit (CD) ratio, and asset quality.
Earlier this month, she had highlighted a discrepancy between the growth rates of deposits and lending. She had noted that lending growth is outpacing deposit growth. She mentioned the August 19 meet to urge banks to boost deposit collection, besides addressing other issues. Meanwhile, she said the RBI has granted banks flexibility concerning interest rates and encouraged them to leverage this flexibility to make deposit options more appealing.
RBI Governor Shaktikanta Das had stated that banks are increasingly relying on short-term, non-retail deposits and various liability instruments to satisfy the growing demand for credit. He highlighted that this trend could potentially lead to structural liquidity challenges within the banking system.
Meanwhile, the State Bank of India (SBI) in its latest report said in FY23, Scheduled Commercial Banks (SCBs) experienced their largest increase in deposits and credit since 1951-52, with deposits rising by Rs 15.7 lakh crore and credit by Rs 17.8 lakh crore, resulting in an incremental credit-deposit (CD) ratio of 113%. This upward trend continued into FY24, with deposits growing by Rs 24.3 lakh crore and credit increasing by Rs 27.5 lakh crore.
Consequently, the report highlighted that the notion of declining deposit growth has proven to be merely a statistical misconception, as the narrative of credit growth outpacing deposit growth has been misinterpreted as a slowdown in deposit growth. Since FY22, incremental deposit growth has reached Rs 61 lakh crore, surpassing the Rs 59 lakh crore rise in incremental credit.
Fall in deposit statistical misconception: Report
An SBI report highlighted that the notion of declining deposit growth has proven to be merely a statistical misconception, as the narrative of credit growth outpacing deposit growth has been misinterpreted as a slowdown in deposit growth. Since FY22, incremental deposit growth has reached Rs 61 lakh crore, surpassing the Rs 59 lakh crore rise in incremental credit