In Short:
State Bank of India’s Managing Director, Ashwini Kumar Tewari, suggested exploring tax benefits and other options to encourage individuals to keep more money in bank deposits. The banking sector is facing a deposit crunch, with high credit-deposit ratios. Tewari highlighted the importance of bank deposits in funding economic activities and suggested relaxing cash reserve ratio for banks. He also emphasized the need to manage risks like climate risk in the banking sector.
Encouraging Bank Deposits: SBI MD’s Insights
In a recent talk, Ashwini Kumar Tewari, managing director of State Bank of India (SBI), proposed innovative solutions to address India’s current deposit crunch, suggesting that the government should consider providing tax benefits to incentivize individuals to keep more money in bank deposits.
Exploring Options for Boosting Deposits
Speaking at a BFSI summit, Tewari highlighted the importance of exploring various measures to enhance bank deposits. He mentioned that aligning investments with deposits and offering tax benefits could be potential solutions to encourage deposits.
Key Role of Bank Deposits
Tewari emphasized the significance of bank deposits in funding economic activities, with banks contributing to almost 90% of economic transactions. He underscored the need to prioritize bank deposits for the overall economic health.
The Impact of SLR
Tewari also discussed the significance of the statutory liquidity ratio (SLR), which plays a vital role in determining lending rates based on the minimum percentage of deposits that banks must maintain as cash, gold, or securities.
Current Challenges and Proposed Solutions
With Indian banks facing challenges in attracting deposits amidst increasing borrowings by customers, Tewari stressed the importance of addressing this imbalance. He suggested exploring avenues such as relaxation in cash reserve ratio and engaging in discussions with industry players and regulators to bridge the gap.
Adapting to Changing Dynamics
Tewari highlighted the evolving landscape of banking, noting the shift of customer deposits from current and saving accounts to fixed deposits and other investment avenues. He also called for measures to control the number of lenders that non-banking financial companies can raise funds from to enhance risk management.
Adapting to New Risks
Recognizing the need to address emerging risks such as climate risk, Tewari emphasized the importance of adopting measures to mitigate these challenges. He mentioned that SBI is actively working on identifying and managing risks associated with climate change.
Overall, Tewari’s insights shed light on the pressing need to explore innovative solutions to promote bank deposits and ensure the stability of the banking sector amid evolving market dynamics.
