Expressing concern over the slow growth in deposit-taking, Sitharaman said small savers are increasingly exploring alternative investment options such as the stock market.
He called on banks to make deposits more attractive and address the growing gap between deposits and loans. Outstanding the importance of focusing on core banking activities, particularly mobilizing deposits and providing credit to those in need of funds.
Reserve Bank of India Governor Shaktikanta Das echoed these concerns, noting that while interest rates are deregulated, banks often adjust deposit rates to attract funds. He noted that banks have increasingly turned to short-term non-retail deposits and other financial instruments to meet rising credit demand.
Earlier this week, while announcing the monetary policy, Das had also warned about the growing imbalance between deposits and loans in the banking sector.
Das warned that banks’ reliance on short-term non-retail deposits could expose the banking system to structural liquidity problems. Das said banks should focus on mobilising household financial savings through innovative products and services, making the most of their extensive branch networks to attract more deposits.
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