Alarm bells rang earlier this year within the ministry of finance and the Reserve Bank of India (RBI) over slowing deposit growth at a time when credit growth was robust. Banks need the fodder of fresh deposits to keep lending going. As Indian economic activity picked up after the Covid shock, and with both bank and corporate balance sheets getting cleaned up, there has been a pick-up in bank credit. But, over the past decade, a mix of investor choices and an increased focus on third-party product sales by bank branch staff have reduced the growth rate of deposits. The fall is sharp enough for both RBI and the finance minister (FM) to worry about it. In fact, the FM met the heads of public sector banks this week and asked them to use innovative methods to drive deposit growth.
