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The recent deposit shortfall is a wake-up call for banks in India
Mint Mumbai
|December 31, 2024
They should treat depositors as business partners if they are to garner enough deposits for lending
Since 1998, there have been at least six occasions when deposit growth trailed credit growth. So, the recent brouhaha over a deposit crunch was surprising, considering it was the sixth, extending from April 2022 to October 2024. As surprising is the relative comfort due to better alignment between credit and deposit growth. In the previous five instances, the deposit-credit growth alignment was a result of both a rise in deposit growth and a fall in credit growth. The current alignment is due to a fall in credit growth and no improvement in deposit growth. This is worrisome. It may be a harbinger of more structural changes in the saving behaviour of households. If the banking system aspires to go back to the 14-16% deposit growth rate before 2016, it may have to treat depositors differently.
This story is from the December 31, 2024 edition of Mint Mumbai.
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