Focus more on deposit mobilisation via innovative products: Shaktikanta Das to banks
- Reserve Bank of India (RBI) Governor Shaktikanta Das on asked lenders to garner deposits through innovative product offerings and use their wide branch network.
Highlights:
- Das expressed worries over banks and non-banking finance companies (NBFCs) not following regulatory norms while offering top-up loans on other collaterlaised loans such as home and gold loans.
- While announcing the monetary policy, the Governor said that it is observed that alternative investment avenues are becoming more attractive to retail customers and banks are facing challenges on the funding front with bank deposits trailing loan growth.
- As of July 12, while deposits grew by 11.7 per cent, loan growth increased by 15.5 per cent.
- Banks are taking greater recourse to short-term non-retail deposits and other instruments of liability to meet the incremental credit demand.
- This may potentially expose the banking system to structural liquidity issues
- “Banks may, therefore, focus more on mobilisation of household financial savings through innovative products and service offerings and by leveraging fully on their vast branch network.
- On the issue of investors using their savings to invest in futures and options (F&O), where a majority of the investors have made losses, the RBI governor said that not all savings are being channelised to the derivative market.
- He also raised concerns over top-up housing loans, which have been growing at a brisk pace.
- Banks and NBFCs have also been offering top-up loans on other collateralised loans like gold loans.
- In November last year, the RBI increased risk weight on the exposure of banks towards consumer credit, credit card receivables and NBFCs by 25 per cent up to 150 per cent.
- Excess leverage through retail loans, mostly for consumption purposes, needs careful monitoring from a macro-prudential point of view.
- This calls for careful assessment and calibration of underwriting standards, as may be required, as well as post-sanction monitoring of such loans.
Prelims Takeaway
- NBFC
- Derivatives