The Governor of the Reserve Bank of India (RBI), Shaktikanta Das, has cautioned banks about the risks of relying too much on short-term deposits. He pointed out that if banks gather more short-term bulk deposits to meet the rising demand for loans, they could face problems with managing their assets and liabilities.
Das highlighted that more people are choosing other ways to invest their money instead of keeping it in bank deposits. This is causing a challenge for banks, as their deposits are not growing as fast as their loans. Credit growth is currently at 15.5%, which is higher than the 11.7% growth in deposits. This widening gap between loans and deposits is worrying the RBI because it increases the risks within the banking system.
Das advised banks to focus on attracting more household savings by offering innovative products and services through their extensive branch networks. He noted that if banks don’t address this issue, they could face difficulties in managing their liquidity. However, Das clarified that it is up to individual banks to decide how to manage their deposit rates, as these are not regulated by the RBI. He encouraged banks to use their branch networks creatively to gather more deposits and support their loan growth.
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