On Saturday, Nirmala Sitharaman, the minister of finance, called on banks to increase public deposit taking and accelerate lending for government initiatives that were unveiled in the 2024–2025 budget.
The Finance Minister told the reporters following a post-Budget discussion with the Central Board of Directors of the RBI that banks need to concentrate on their primary operations, which include lending and deposit collection.
She made the point that the RBI has given banks ample latitude in setting interest rates, and that they ought to develop creative deposit-attracting portfolios to increase the amount of money available for lending in order to promote economic expansion and job creation.
She stated that although stock markets were becoming more and more popular with investors, banks also needed to devise strategies to draw in additional deposits.
The Finance Minister went on to say that banks, with their extensive branch networks, should concentrate on obtaining more smaller deposits, which arrive in the form of “trickles” but are the “bread and butter” of the banking system, rather than only large deposits.
Shaktikanta Das, the governor of the Reserve Bank of India, also noted that the percentage of total deposits in banks’ low-cost current and savings accounts (CASA) had decreased from 43% to 39% this year.
Therefore, rather than concentrating solely on bulk deposits where the “flight can be very fast,” banks must concentrate on these CASA deposits in order to reduce expenses, he continued.
The governor of the RBI added that, in contrast to many other nations, India’s banking industry is thought to have a relatively stable interest rate regime.
According to Das, the RBI has granted banks some leeway over interest rates, meaning that certain banks were able to offer higher rates on deposits in order to draw in more money. According to him, this was a necessary step in the economic reform process, and adding more regulations would be a step backward.
The issue of unconfirmed media stories that frequently mislead investors and breed anxiety was also brought up by the Finance Minister. She made the point that before publishing critical reports on the financial sector, information must be verified with the RBI or the Finance Ministry. She mentioned media allegations that there was “no basis” for the government’s proposed hike in the investment cap in foreign banks in this context.
