Finance Minister Nirmala Sitharaman has called on public sector banks to enhance their deposit growth rates to keep pace with the rapid expansion in credit.
During a review meeting on Monday, Sitharaman highlighted concerns over a growing mismatch between deposit growth and credit issuance, which she warned could lead to potential risks in the banking sector.
Recent data reveals that deposit growth is lagging 3 to 4 percent behind the rate of credit growth, posing a risk of asset-liability imbalances.
Sitharaman’s meeting with bank chiefs focused on addressing this disparity and ensuring financial stability.
The Finance Minister also reviewed the financial performance of banks and assessed their progress in implementing various government social welfare schemes, including the PM Vishwakarma Yojana, PM Awas Yojana, and PM Surya Ghar Muft Bijli Yojana.
Additionally, she evaluated the status of non-performing assets and the recovery efforts underway.
Sitharaman emphasized the need for banks to increase public deposits and enhance their lending for government schemes outlined in the Budget for 2024-25.
She stressed the importance of banks focusing on their core functions of deposit mobilization and lending to support economic growth and job creation.
In a recent meeting with the RBI’s Central Board of Directors, Sitharaman urged banks to utilize the flexibility granted by the Reserve Bank of India in setting interest rates.
She encouraged them to develop innovative deposit products to attract more funds and boost lending capacity.
Despite the rising appeal of stock markets to investors, Sitharaman underscored the necessity for banks to devise strategies to attract both large and small deposits.
She noted that smaller, incremental deposits, though less glamorous, are crucial to the banking system’s stability and operations.
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