“There is no silver bullet for this,” Warrier said on Bloomberg TV on Monday. When “fixed deposit rates don’t rise as much as customers would like, they look for alternatives.”
Deposit growth has lagged behind strong credit demand in India for several quarters, prompting top officials to intervene. Finance Minister Nirmala Sitharaman and Shaktikanta Das, governor of the Reserve Bank of India, have urged banks to innovate to boost their deposits as household savings shift to investment products.
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If deposits fail to increase, loan growth will have to “moderate” and “companies will have to look for other alternative opportunities to raise funds,” Warrier said in his interview with Paul Allen and Avril Hong.
Warrier, the top Federal Bank executive, added that lending could also be hampered by a draft RBI proposal that would require banks to hold more liquid assets to cover retail deposits from internet and mobile banking. “What would potentially happen is the cost of deposits would go up for banks,” she said, and banks will “pass that on in some form and fashion to the cost of borrowing so that margins are maintained.” Federal Bank’s deposit growth roughly matched credit growth for the year ended June 30, 2024, according to its latest earnings filing, up 20% year-on-year and 5.4% quarter-on-quarter.
“Our focus has been on reaching out to those places where the industry is flourishing, particularly around what we call the ‘Made in India’ spirit and philosophy of small and medium-sized enterprises,” Warrier said.
The bank also used its digital platform and partnerships with fintech companies to reach more customers, he said.
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