Need to consider shutting loss-making branches: Bank secy

India needs to consider closing down loss-making branches of state-run banks and insurance companies, said DK Mittal, the country's banking secretary.

"Branches are there for commercial purpose. You cannot run a loss-making branch," he told reporters on Monday.

Banking shares declined after deposit growth fell short of projections for the fiscal year ended in March, as the withdrawal of funds by customers coping with high inflation contributed to an acute liquidity crunch.

Net interest margins in the sector could be hit as banks may have to raise the rates offered on deposits to retain customers, analysts said.

Also weighing on the sector, Finance Minister Pranab Mukherjee warned on Saturday that a slowdown in India's economic growth could impact asset quality, adding banks would have to raise additional capital to comply with Basel III rules.

Mittal sees clarity on PSU banks