Banks must raise more deposits, step up lending: FM Sitharaman

New Delhi, Aug 10 (IANS) Finance Minister Nirmala Sitharaman on Saturday urged banks to raise more deposits from the public and step up lending for government schemes announced in Budget 2024-25.

Addressing the media after a post-Budget meeting with the RBI’s Central Board of Directors here, the Finance Minister said that banks must focus on the core business of raising deposits and lending.

She pointed out that the RBI has given enough liberty to banks to fix interest rates and they should come out with innovative portfolios to attract deposits so that more funds are available for lending to spur economic growth and create more jobs.

She said that while investors were increasingly turning to the stock markets, banks also needed to come up with schemes to attract more deposits.

The Finance Minister further stated that instead of focusing only on big deposits, banks with their vast network of branches must focus on raising more smaller deposits which come in “trickles” but are the “bread and butter” of the banking system.

RBI Governor Shaktikanta Das also pointed out that low-cost current and savings accounts (CASA) of banks had come down from 43 per cent of total deposits a year ago to 39 per cent this year.

Banks, therefore, need to focus on these CASA deposits to cut costs instead of focusing only on bulk deposits in which the “flight can be very fast,” he added.

The RBI Governor also said that India’s banking sector is considered to have a very stable interest rate regime and it was not volatile like many other countries.

Das said that the RBI had given some liberty to banks on interest rates under which some banks were offering higher interest rates on deposits to attract more funds. This was part of the economic reform process and any increase in regulation would be a retrograde step, he added.

The Finance Minister also mentioned the issue of unverified media reports that tend to mislead investors and create uncertainty. She pointed out that there is a need to confirm facts with the Finance Ministry or the RBI before putting out sensitive reports on the financial sector. In this context, she cited media reports on the government planning to increase the investment limit in foreign banks which had “no basis.”