New Delhi: Amid widening gap in bank deposit and credit growth, Finance Minister Nirmala Sitharaman on Monday asked public sector banks (PSBs) to make concerted efforts and conduct special drives to garner deposits.
In a meeting to review the performance of public sector banks, Sitharaman stated that “while credit growth has picked up, mobilisation of deposits could further be improved to fund the credit growth sustainably and asked banks to make concerted efforts to garner deposits by conducting special drives,” as per an official statement after the meeting.
Heads of public sector banks and regional rural banks and top Finance Ministry officials attended the meeting chaired by Sitharaman.
Last month, Reserve Bank of India (RBI) Governor Shaktikanta Das flagged concerns over the widening gap in deposit and credit growth and warned that it could potentially expose the banking system to structural liquidity issues.
During 2023-24, all scheduled commercial banks’ credit increased by Rs 27.5 lakh crore while the deposits grew by Rs 24.3 lakh crore. This means the banks lent Rs 3.2 lakh crore more than they received in deposits during the year. In 2022-23, deposits increased by Rs 15.7 lakh crore while credit increased by Rs 17.8 lakh crore, a gap of Rs 2.1 lakh crore.
However, SBI Research said in a report on Monday that incremental deposit growth since 2021-22 has outpaced credit growth. Banking sector deposit growth since FY22 is at Rs 61 lakh crore outpacing credit growth at Rs 59 lakh crore.
According to SBI Research, current account and savings account (CASA) deposits are prone to UPI transactions and thus could be moving across the banking system. CASA deposits refer to the money deposited by customers in their savings and current accounts. This is the cheapest and major source of funds for banks.
The share of CASA deposits in the overall bank deposits declined to 41 per cent in 2023-24 from 43.5 per cent in 2022-23. This has been dragged by the decline in savings bank deposits.
Rising return on term deposits has been driving the compositional shift: the share of term deposits in total deposits has risen to 59 per cent in FY24 from 56.5 per cent in FY23. On an incremental basis, term deposits accounted for nearly 78 per cent of the total deposits in FY24, SBI Research said.
Meanwhile, during the review meeting, according to the Finance Ministry statement, it was noted that PSBs performed well across all financial parameters during the financial year 2023-24.
During the financial year ended March 2024, PSBs’ net non-performing assets (NPAs) stood at 0.76 per cent, capital adequacy ratio at 15.55 per cent and net interest margin at 3.22 per cent. Net aggregate profit of PSBs rose to a record high of Rs 1.45 lakh crore during the fiscal 2023-24.