How to increase the pace of growth in bank deposits
Improving deposit growth in banks: A few suggestions While scheduled commercial banks (SCBs) have grown their loan books impressively during the post COVID period (since April 2021), their growth in deposits did not match the growth under loans during the same period. In fact, only in 2023-24, the deposit growth of SCBs crossed two digits (lower single digits in the previous two years) as compared to the aggressive growth of 15-20% in the loan books in the last three years. As (i) 22.5% of any deposit sourced needs deployment in cash with RBI and eligible SLR securities and (ii) loan growth outpaced deposit growth by a considerable margin, apart from CD ratio reaching almost beyond manageable limits, a situation has come where the banks have to either borrow in the market (including medium term notes) or rely on the costly short term certificates of deposits, popularly known as bulk deposits. In this regard, the GDP growth is healthy indicating that the demand for loans...