Banks are seeing a significant shift in customer deposits to higher yielding fixed deposits and other investment avenues such as mutual funds and equities, said Ashwini Kumar Tewari, managing director of State Bank of India.
Anshika Kayastha
Published22 Jul 2024, 07:41 PM IST
Ashwini Kumar Tewari, MD, State Bank of India
Mumbai: The government needs to explore options such as tax benefits to encourage individuals to keep more money in bank deposits, said Ashwini Kumar Tewari, managing director of State Bank of India, adding to the chorus on India’s worst deposit crunch in two decades.
“We have to think through various things, what are the options. Taxation benefits could be given… Some alignment could be done with investments linked to deposits,” Tewari said at a BFSI summit organised by CareEdge Ratings on Monday.
“There could be talk about SLR, etc. Can (banks) get some dispensations there? Because banks continue to fund almost 90% of economic activity and as long as that is the case, bank deposits are really important,” he said.
Play
Unmute
Loaded: 5.75%
Fullscreen
SLR, or the statutory liquidity ratio, is the minimum percentage of deposits that a bank has to maintain as cash, gold or securities, which would have an impact on its lending rates.
Indian banks have been struggling to attract deposits even as customers have been borrowing heavily, leading to the highest credit-deposit ratio in the banking system in at least 20 years. Last week, Reserve Bank of India governor Shaktikanta Das warned that this could “potentially expose the system to structural liquidity issues”.
Also read | Mint Explainer: Behind the worst bank deposit crunch in nearly 20 years
Tewari said a relaxation in the mandated cash reserve ratio for banks could also help narrow the gap between credit and deposit growth, and that discussions are on between industry players and the regulator. CRR is the percentage of money a bank has to keep with RBI in the form of cash.