Banks Need Rs. 20 Lakhs Crore Deposits for Credit Growth
By March 2020 the banks will require raising over 20 lakh crore because of the jump in credit growth and may also push up interest rates reported on Wednesday.
In the past few years the deposit growth rates has dropped due to lower interest rate on fixed deposits as compared to the other financial avenues, it said that the banks have been collecting average of Rs. 7lakh crore per annum in the last few years.
In addition to that the deposits requirements will also “put upwards pressure on the interest rates bank offer on deposits” said the agency.
The banks will continue to rely on excess investments in the government securities beyond the mandatory statutory liquidity ratio in order to fuel credit demand but it will also have to increase the deposits. They said adding the excess SLR books of banks will have to 4 %.
The agency also said that the credit growth in the system is likely to raise 13-14 percent to fiscal years 2018-2019 and 2019-2020, as against the 8 percent observed in FY18.
Private Banks having strong balance sheets and robust credit growth are expected to lead the race for the deposits and will account for 55-60 percent incremental deposit mobilization, the agency said adding the state-run banks outside prompt corrective action framework will garner 30-35 percent.