Finance Minister Nirmala Sitharaman has urged banks to refocus on their fundamental activities of lending and deposit mobilisation, expressing concern over a growing imbalance between the two.
During a post-budget meeting with the central board of the Reserve Bank of India (RBI) on Saturday, Sitharaman highlighted the need for banks to adopt “old-fashioned” methods to attract deposits through innovative and appealing schemes.
The finance minister’s comments come amid concerns that lending activities have outpaced deposit growth, creating a potential risk for the banking sector.
“Deposits and lending are the two wheels of a cart, but currently, the deposit wheel is moving slower than lending,” Sitharaman remarked, emphasising the need for banks to achieve equilibrium.
Sitharaman announced plans to review the performance of the banking sector soon, focusing on key issues such as the implementation of government schemes and priority-sector lending.
Her remarks echo concerns previously raised by the central bank regarding the mismatch between deposit growth and lending activities.
RBI Governor Shaktikanta Das, speaking at the same event, revealed that banks would soon initiate a campaign to settle unclaimed deposits.
He noted that a similar drive launched last year saw each bank branch proactively resolve the top 10 unclaimed deposit cases by reaching out to the rightful claimants. The outcome, according to Das, was “satisfactory.”
Das also highlighted the Unclaimed Deposits Gateway to Access Information, or ‘UDGAM,’ a dedicated portal developed by the RBI. The portal allows registered users to search for unclaimed deposits across multiple banks in a centralised manner.
As of March 31, 2024, unclaimed deposits with banks had risen 26% year-on-year to Rs.78,213 crore, according to the RBI’s annual report.
In a related development, Sitharaman addressed concerns about the impact of political instability in Bangladesh on the Indian economy, particularly on the garment sector, which is heavily invested in the neighbouring country.
She acknowledged the uncertainty faced by Indian investors in the Bangladeshi textile industry and expressed hope that the interim government in Dhaka would restore normalcy “sooner rather than later.”
Bangladesh, which enjoys Least Developed Country (LDC) status, offers significant duty advantages of about 9-10% for exports to major markets, benefiting industries, particularly those from Tamil Nadu, that have invested there.
“It is too early to assess the full impact of the situation in Bangladesh on our economy,” Sitharaman said, adding that she hopes for a swift resolution that will allow both Indian and Bangladeshi stakeholders to return to business as usual.
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