Banks must focus on their core business, come with innovative products to raise deposits: FM Sitharaman

New Delhi [India], August 10 (ANI): Union Finance Minister Nirmala Sitharaman, again asked the banks to focus on their core business and come with innovative products to increase deposits.
Addressing a press conference following a customary post budget meeting with the Central Board of Directors of the Reserve Bank of India (RBI), the Finance Minister stated, "The Reserve Bank and the Government are repeatedly telling the banks to pay attention to their core business activities. It is not that they are not paying attention, but collect deposits and lend with more strictness as this is the core business of banking. Later you can add some new activity if there is a mismatch between deposits and lending, and the wheel of deposit is being slowed down and lending is increasing fast."
In reply to a question the finance minister added that she will again raise this issue with banks
"I, in fact, will be meeting with the banks for various reasons to take up comments, priority sector lending, emphasis on some of this common schemes, and also in that process, talking to them about how it is important for them to grow the banks," she added
The RBI governor Shaktikanta Das also expressed his concern on the issue and said the central bank has alerted banks on the issue several times, lastly in the previous policy on 8th August as well. Governor Das added that from the last few months the gap between deposit and lending is over 300 points in such situations the RBI's role is to alert the banks on the situation.
"It has been observed for last few months the gap between deposit and lending is over 300 points. Our role is to alert the banks, banks need to be cautious and use their branch network to come up with innovative schemes to reduce this gap" said Das
The Governor also added that the situation could vary from bank to bank. He mentioned that at times certain banks launch a special drive to raise deposits, so they tend to give a higher rate of interest for deposit mobilization.
He also highlighted about the situations where if the CASA deposits in a particular bank is low and they want to raise the CASA deposit percentage in their overall deposit base. So the banks temporarily for a few months increase the interests which they pay on the savings bank account and deposit accounts.
CASA deposits are the money that customers deposit into their current and savings accounts at a bank. CASA stands for Current Account Savings Account, and these accounts are a major source of funds for banks because they are cheaper than term deposits
"So this is completely deregulation and it's for the bank to decide taking into account overall financial sector and macroeconomic conditions and the situation with regard to their balance sheet" added Das. (ANI)