times to come Banks can launch attractive deposit schemes. In fact, Finance Minister Nirmala Sitharaman said on Saturday that banks should come up with unique and attractive schemes to raise deposits. After addressing the board of directors of the Reserve Bank of India, Sitharaman told reporters, “Deposits and loans are two wheels of a vehicle and deposits have been growing slowly.” She said that banks need to focus on core banking i.e. main business. This includes raising deposits and giving loans to those who need funds.
Instructions to bring a ‘unique and attractive’ scheme
Sitharaman asked banks to come up with “unique and attractive” deposit schemes to raise funds from people to bridge the gap between deposits and loans. RBI Governor Shaktikanta Das said interest rates are deregulated and often banks raise deposit rates to attract funds. “Banks are free to decide on interest rates,” Das said. While presenting the bi-monthly monetary policy this week, he had expressed concern over the growing gap between deposits and loans in banks.
Focus more on mobilizing domestic savings
He had said that banks are increasingly resorting to short-term non-retail deposits and other means of liabilities to meet the growing demand for loans. Das cautioned that this could bring out structural cash issues in banks. That is why banks can focus more on mobilizing domestic financial savings through innovative products and service offerings and by leveraging their vast network.
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