Indian banks need to carefully monitor the gap between loan and deposit growth to avoid a potential structural liquidity problem, the Reserve Bank of India (RBI) governor said on Tuesday.
“Young Indians are ambitious. They are attracted to different markets. There is nothing wrong with that, it is a natural process and a positive development,” said Shaktikanta Das in an interview with local television channel NDTV Profit.
“We warn banks to monitor this situation carefully. There is no problem now, but it may become a structural liquidity problem in the future.”
Indian banks’ loans rose 13.7% year-on-year through July 26, while deposits grew 10.6%, the latest provisional data from the RBI showed.
Healthy economic growth and rising urban consumption have boosted credit demand, while deposit growth has lagged.
Banks need to attract more deposits through innovative products and service offerings, said Governor Das.
While credit growth and lending have accelerated thanks to technology, deposit mobilisation, which largely occurs through physical channels, has lagged, he said.
