New Delhi: On Saturday, Finance Minister of India Nirmala Sitharaman encouraged banks to increase public deposits and boost lending for the government initiatives outlined in the 2024-25 Budget.
Speaking to the media after a post-Budget meeting with the RBI’s Central Board of Directors, the Finance Minister emphasised the importance of banks focusing on their primary activities—raising deposits and lending.
She highlighted that the RBI has provided banks with sufficient flexibility in setting interest rates, urging them to develop innovative products to attract deposits, thereby ensuring more funds are available for lending to stimulate economic growth and job creation.
Sitharaman also noted the growing investor interest in the stock market and stressed that banks must introduce schemes to draw in more deposits. She further advised banks to focus on accumulating smaller deposits from their extensive branch networks, describing these as the “bread and butter” of the banking system, despite their gradual accumulation.
RBI Governor Shaktikanta Das observed that the proportion of low-cost current and savings accounts (CASA) deposits had decreased from 43% of total deposits last year to 39% this year. He urged banks to prioritize these CASA deposits to reduce costs, rather than relying solely on large deposits, which are prone to quick withdrawals.
Das also remarked that India’s banking sector enjoys a stable interest rate environment, unlike the volatility seen in other countries. He noted that some banks, given the RBI’s flexibility on interest rates, are offering higher rates to attract more deposits, which is part of the ongoing economic reforms. Any move to increase regulation, he cautioned, would be a step backward.
Additionally, the Finance Minister addressed concerns about unverified media reports that can mislead investors and create uncertainty. She stressed the importance of verifying information with the Finance Ministry or the RBI before publishing sensitive reports on the financial sector, citing recent baseless reports about the government planning to raise the investment limit in foreign banks.
