Finance Minister Urges Banks to Innovate Amid Deposit-Lending Imbalance

Union Finance Minister Nirmala Sitharaman urged banks to focus on their core business and innovate to bridge the deposit-lending gap. RBI Governor Shaktikanta Das also raised concerns, highlighting the growing disparity in recent months. Both stressed the need for banks to offer competitive schemes to attract deposits.

Union Finance Minister Nirmala Sitharaman has once again called on banks to concentrate on their core business and introduce innovative products to boost deposits. Speaking at a press conference after a customary post-budget meeting with the Reserve Bank of India's (RBI) Central Board of Directors, she reiterated the importance of deposit-collection and prudent lending as key functions of banking.

In response to a query, the finance minister said she would further discuss the issue with banks, emphasizing the need for growth and efficient handling of priority sector lending and common schemes. Sitharaman stressed the importance of banks growing their operations responsibly.

RBI Governor Shaktikanta Das also voiced concerns, noting that the gap between deposits and lending has widened to over 300 basis points in recent months. Das emphasized that the RBI's role is to alert banks and encourage them to use their branch networks to create innovative schemes to bridge this gap.

Das also mentioned that deposit collection strategies can vary from bank to bank. Some banks may launch special drives or offer higher interest rates temporarily to increase their CASA deposits. CASA deposits, which include current and savings accounts, are a vital and cost-effective source of funds for banks. The governor stated that banks have the autonomy to decide on their deposit mobilization strategies based on overall financial sector and macroeconomic conditions.

(With inputs from agencies.)