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Finance Minister Nirmala Sitharaman urged banks to focus on their core business and explore new ways to attract deposits as household savings are increasingly shifting towards investment products.
“Both the RBI and the government want banks to focus on their core business. That is their bread and butter,” Ms Sitharaman said at a briefing following the Reserve Bank of India's board meeting.
Banks must offer attractive deposit plans, she said, echoing comments made by Reserve Bank of India (RBI) Governor Shaktikanta Das in his recent monetary policy speech.
Indian banks have seen significant credit expansion in the post-pandemic period, but sluggish deposit growth threatens to damage the financial sector.
On Thursday, the RBI warned banks that this discrepancy could lead to liquidity problems and asked them to use their extensive branch network to increase their deposits.
“As things stand today, we do not see a crisis, but individual banks have to deal with it,” Das said at the press conference. “If things continue like this without us taking action, it could lead to a potential structural problem in liquidity management.”
India's financial regulator has expressed concern over the rise in the loan-to-deposit ratio, which measures how much of a bank's deposits are lent out.
The gap between loan and deposit growth rates requires bank boards to re-orient their business plans, the RBI said in its June bulletin.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
