The finance minister asked banks to concentrate more on their core banking operations; insiders think FM should also concentrate on cybersecurity measures to thwart frauds.
According to two senior officials, the meeting between Finance Minister (FM) Nirmala Sitharaman and heads of public sector banks (PSBs) on August 19 will primarily center on the steps that lenders have taken to mobilize deposits, with a secondary emphasis on the cybersecurity measures implemented to prevent fraudulent activities. The FM will assess the PSBs’ credit-deposit (CD) ratios and the steps taken to improve deposit mobilization. It is also expected that discussions on cybersecurity precautions against scams will take place, an official stated. While banks’ CD ratios have often been around 80% since September 2023, CareEdge Ratings reports that for the fortnight ending July 26, 2024, it decreased by 5 basis points (bps) from the previous fortnight and stood at 79.3%.
A few mid- to small-sized banks are raising deposit rates in an effort to attract depositors, while a few major lenders are slowing down lending growth in order to keep up with deposits. Recently, banks were advised by Finance Minister Nirmala Sitharaman to concentrate more on their core business of mobilizing deposits and lending money to people in need. Referring to deposits and credit as two wheels, she stated that a correction is necessary because the first wheel (deposit) is slow while the second wheel (credit) is rapid.
Earlier in the week, RBI governor Shaktikanta Das voiced concerns over the gap between deposits and loans in the banking industry when announcing the bimonthly monetary policy. He had stated that in order to accommodate the increased demand for credit, banks were turning more to short-term non-retail deposits and other instruments of liability. The FM will examine PSBs’ asset quality trends and how well banks are enticing clients to apply for new government loan programs, such as PM SVANidhi Yojana, PM Awas Yojana, and PM Vishwakarma scheme, among others, during the meeting on Monday, according to the officials.
Sitharaman is expected to examine the extent to which regional rural banks’ (RRBs’) digital infrastructure has advanced to accommodate the increasing number of online transactions.
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