RBI MPC: Governor urges banks to mobilize household financial savings, focus on branch network to attract deposits

Governor Shaktikanta Das highlighted concerns on the need for Indian banks to innovate to attract deposits.

Reserve Bank of India (RBI) Governor Shaktikanta Das urged banks to be more innovative to attract deposits. Das said that banks need to focus on mobilisation of household financial savings and service offerings and by leveraging fully on their vast branch network.

“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 a result, banks are taking greater recourse to short-term non-retail deposits and other instruments of liability to meet the incremental credit demand. This, as I emphasised elsewhere, may potentially expose the banking system to structural liquidity issues," Das said in his monetary policy review address on August 8.

Das highlighted that banks may have to focus more on mobilisation of household financial savings through innovative products and service offerings and by leveraging fully on their vast branch network.

The Monetary Policy Committee (MPC) of the RBI has decided to keep the repo rate unchanged at 6.5 percent by a majority of 4:2 in the six-member panel. The MPC also decided to remain focused on the 'withdrawal of accommodation' stance by the same majority. Consequently, all other rates like SDF, MSF, Bank Rate too remained unchanged.

Governor Das said that the domestic economic activities continued to remain resilient. He projected the real GDP growth at 7.2 percent for 2024-25.

The other rates namely, standing deposit facility (SDF) rate also remained unchanged at 6.25 percent and marginal standing facility at 6.7 percent. The bank rate was also maintained at 6.7 percent. “There is a good amount of convergence in RBI policy and market expectation,” Governor Das said while delivering his MPC speech.