⁠RBI's Das Asks Banks To Be Proactive In Dealing With Liquidity Management

Banks have to be proactive in dealing with liquidity management because the persistent gap between credit and deposit growth could become a challenge, leading to structural liquidity issues, Reserve Bank of India Governor Shaktikanta Das told NDTV Profit in an exclusive interview on Tuesday.

Das asked banks to maintain a balance between credit and deposit growth. What is positive, is that banks are raising funds through infrastructure bonds these days at attractive rates, he said.

A lot of banks are lining up infrastructure bonds to support their balance sheets, he said. Banks and financial institutions raise funds through infrastructure bonds to finance their long-term infrastructure projects. These bonds have a minimum maturity of seven years and are eligible for some regulatory exemptions.

Banks should also carefully monitor the change in investment strategies of young aspirational Indians, Das said. As of now, the shift from deposits to other investment avenues is not an issue, but in the future, it can lead to a structural liquidity issue.

There has been an increase in credit disbursement due to a rise in digital banking but garnering deposits has remained a challenge. Therefore, banks must introduce new products and services in deposits, as well as use their vast branch networks to their advantage, he said.

During his speech last month, the governor said that households are increasingly turning to other avenues for deploying their savings instead of banks.

"Households and consumers who traditionally leaned on banks for parking or investing their savings are increasingly turning to capital markets and other financial intermediaries," he said in his speech about current issues in the Indian banking and financial sector.

While bank deposits remain a dominant percentage of financial assets owned by households, their share has been declining, with households increasingly allocating their savings to mutual funds, insurance funds, and pension funds.

As of July 26, the scheduled commercial bank's non-food credit was Rs 167.86 lakh crore, up 13.6% on the year, according to RBI's weekly data. Deposits totaled Rs 211.94 lakh crore, up 10.5% on a year on year basis.

Last month, Securities and Exchange Board of India Chief Madhabi Puri Buch also issued an investor safety warning after there was a surge in futures and options volumes.

She had pointed out that young investors have been venturing into the segment and making significant losses, and it was not expected the way F&O trading volumes grew over the last few years.