Finance Minister Urges PSBs to Boost Deposit Mobilization

On 19th August, 2024, amid a widening gap between deposit and credit growth, Finance Minister Nirmala Sitharaman called on public sector banks (PSBs) to intensify efforts to garner deposits through special drives.

Key Points

Call for Action on Deposit Mobilization: In a review meeting, FM emphasized the need for PSBs to improve deposit mobilization to sustainably fund the increasing credit growth, urging them to conduct special drives to attract deposits.
Concerns Over Widening Gap: RBI Governor Shaktikanta Das recently highlighted concerns about the growing disparity between deposit and credit growth, warning of potential structural liquidity risks for the banking system.
Credit Growth Outpacing Deposits: During the fiscal year 2023-24, credit growth among scheduled commercial banks exceeded deposit growth by Rs 3.2 lakh crore, indicating that banks lent more than they received in deposits.
SBI Research Insights: According to SBI Research, since FY22, deposit growth has outpaced credit growth, but there is a shift from low-cost CASA deposits to term deposits, driven by rising returns on term deposits.
Decline in CASA Deposits: The share of CASA deposits in total bank deposits fell to 41% in 2023-24 from 43.5% in 2022-23, reflecting a decline in savings bank deposits.
Strong Financial Performance of PSBs: Despite challenges, PSBs reported strong financial performance in FY24, with net non-performing assets (NPAs) at 0.76%, a capital adequacy ratio of 15.55%, and a record net profit of Rs 1.45 lakh crore.