SBI Chairman Khara: New Rules Discouraging Retail F&O Trading Could Boost Bank Deposits

Mumbai: New rules discouraging retail investors from betting on the derivatives market could help banks gather more deposits, says SBI Chairman Dinesh Kumar Khara.

Khara mentioned that recent budget changes to short-term and long-term capital gains won’t significantly increase deposits.

“The regulator is discouraging retail investors from using futures and options (F&O). Those who use these instruments might return to the banking system,” Khara told PTI over the weekend.

There are concerns among policymakers that 90 percent of retail investors lose money in derivatives, which could be affecting household savings. They worry that money is being wasted on speculation instead of being used productively.

According to Sebi, the capital markets regulator, retail investors lost Rs 52,000 crore in F&O trading in FY24 alone, prompting a need to reduce such activities. Sebi has introduced a seven-point plan to cut down on these trades, and the Union Budget also includes measures to discourage them.

In the past three years, deposit growth hasn’t kept pace with credit expansion. Khara said money is moving into other avenues like the capital markets. However, he stressed that bank accounts remain the main place for savings. He recalled a similar situation in 2011 when deposit growth lagged behind credit growth.

Currently, there are concerns that the gap between deposit and credit growth might cause banks to slow down on granting loans, which could harm overall economic growth.

SBI, the country’s largest bank with over a fifth of the market share, aims for 15 percent credit growth and 8 percent deposit growth in FY25, Khara said. He added that the bank will try to achieve 10 percent deposit growth.

Despite slower deposit growth, Khara is confident they can meet their credit growth target due to their strong liquidity position. The bank has been using its excess deposits in its investment book but is now unwinding those investments to meet credit demand.

Khara mentioned that SBI’s liquidity coverage ratio is at 128 percent, and they plan to keep it above 110 percent.