Reserve Bank of India Governor Shaktikanta Das has said banks should be proactively careful about dealing with liquidity management and maintain the balance between credit and deposit growth.
Banks are raising funds through infrastructure bonds at attractive rates, Das said. “Such bonds do not have reserve requirements. These bonds are being used to finance infrastructure schemes, which is a positive move. Credit disbursement has become very fast owing to mobile banking, but deposit mobilisation is still a physical activity,” Das in an interview to NDTV television channel.
Das said young Indians are aspirational and there is nothing wrong in it. “It is a natural process and is actually a positive development. Our advice to banks is that you should carefully monitor this change. Currently this is not an issue, but in the future, this can lead to a structural liquidity issue,” RBI Governor said.
While credit growth has been rising, many banks reported a decline in deposits during the quarter ended June 2024 as customers are now looking at alternative avenues like the capital markets to park their funds at better returns. Reserve Bank’s latest data shows that credit growth rose by 15.1 per cent as of July 2024 as against 14.6 per cent on a year-on-year basis. However, deposit growth declined to 10.6 per cent from 12.9 per cent a year ago.
He said the RBI’s actions against certain entities is not a punishment, it is a corrective measure. “We conduct on-site and off-site supervision of entities we regulate. Supervision has been developed and used to its best. We are maintaining an eagle’s eye on the entities. When we find a deficiency, we alert the entities and ask for a clear roadmap,” he said.
“Our expectation is that they address the deficiency in time. Our action comes after the entities have been given time to address the issues. Supervisory restrictions prioritise depositor and consumer interest,” Das said.
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On excluding food prices from retail inflation, Das said, “we cannot take fuel and food out of the equation and say that inflation is falling. It is not looking at the issue through the common person’s lens. Food inflation share in overall consumption basket is 46 per cent.”
“Nearly 50 per cent of a household’s spending is toward food… future data will determine where rates will move. We have confidence that inflation will fall and come around 4 per cent, but for this year, average CPI inflation rate is 4.5 per cent. There are a lot of uncertainties to account for right now,” Das said.
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“We never said inflation will go below under 4 per cent, our target is durable alignment to the target, to stay close to 4 per cent. A one-off 4 per cent reading cannot drive policy, we have to be patient,” RBI Governor said.
On fintech regulations, he said serious fintech players understand RBI’s regulatory approach very well. “Our bilateral engagement with fintech players and associations have been great. Our fintech department has holding regular meetings individually and as a group. Last year we announced a fintech SRO, which will act as an interface between RBI and fintech players,” Das said.
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He said the RBI is making good progress on the fintech SRO. “Any fintech player, when they come into a regulated space, there are rules and regulations they must follow. Whenever we see any areas where risk might be building up, we have taken action,” Das said.
Cyberattack is a risk which is rising as technology continues to grow, he said. “We have worked on creating awareness around cyber risks for customers. We are also creating a public repository for digital lending apps,” he said.
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The RBI is regularly in touch with banks and NBFCs over cyber security, constantly working with them to improve the quality of this security, he said. “When Covid started, one of the first measures was to issue a clear advisory. That was the time when we could expect maximum attacks on IT systems.”
