FM Nirmala Sitharaman suggests banks introduce new products to attract deposits.

During the recent board meeting of the Reserve Bank of India, Finance Minister Nirmala Sitharaman urged banks to come up with creative and appealing ways to gather deposits. She emphasized the importance of both deposits and lending in the banking sector, stating that they are like the two wheels of a cart. However, she noted that the deposit wheel seems to be moving slowly and needs some attention.

Sitharaman stressed the need for banks to focus on their core banking business, which involves mobilizing deposits and providing loans to those in need. She also recognized the mismatch between deposits and lending and suggested that banks should introduce innovative and attractive deposit schemes to attract funds from the public.

RBI Governor Shaktikanta Das also addressed the issue of interest rates during the meeting. He reminded everyone that interest rates are deregulated and it is common for banks to raise deposit rates in order to gather more funds. He also added that banks are free to decide on their own interest rates.

In the bi-monthly monetary policy announcement earlier in the week, Governor Das expressed his concern about the deposit-lending mismatch in the banking sector. He pointed out that banks are increasingly relying on short-term non-retail deposits and other liability instruments to meet the growing demand for credit. This could potentially lead to structural liquidity problems in the banking system. To avoid this, Governor Das urged banks to focus on mobilizing household financial savings by offering innovative and attractive products and services, and making use of their vast branch networks.

In conclusion, Finance Minister Sitharaman and RBI Governor Das both emphasized the importance of banks focusing on their core banking business and coming up with new and attractive deposit schemes to gather funds. This will not only help address the current mismatch between deposits and lending, but also ensure the stability and growth of the banking sector.

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