New Delhi. Finance Minister Nirmala Sitharaman and RBI Governor Shaktikanta Das discussed the banking issue on Saturday. Later, the Finance Minister and the Governor said in a joint press conference that banks are free to decide on interest rates.
Interest rates on bank deposits and loans have been deregulated. Now banks are free to decide their own rates. Therefore, they should focus on bringing such products which can increase the deposits.
Actually, the Finance Minister and the Governor were present in the meeting of the Central Board of Directors of RBI and after the meeting the Finance Minister said that both the government and RBI are asking the banks to focus on core banking. Our aim is to maintain stability in the Indian banking sector and keep the financial position of the banks strong. Currently, the ratio of loan distribution in banks is higher than the deposit amount. People are focusing on market related products instead of banking products for investment. In such a situation, banks will have to bring new products to compete with them.
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Banks should bring unique schemes: Sitharaman
Finance Minister Nirmala Sitharaman said on Saturday that banks should bring unique and attractive schemes to raise deposits. She said, ‘Deposits and loans are two wheels of a vehicle and deposits are increasing slowly. Banks need to focus on core banking i.e. main business. This includes raising deposits and giving loans to those who need funds.
Emphasis on raising interest rates
RBI Governor Shaktikanta Das said that interest rates are deregulated and banks often raise deposit rates to attract funds. Banks are free to take decisions on interest rates. Banks are resorting more to short-term non-retail deposits and other means of liability to meet the increasing demand for loans. Das warned that this could bring out structural cash issues in banks. Therefore, more attention should be paid to mobilizing domestic financial savings through innovative products and service offerings and by taking advantage of their vast network.
