Amid Finance Minister Nirmala Sitharaman and the Reserve Bank of India’s push to banks for raising deposits, banks are ramping up efforts to attract more depositors. To counter the challenge of losing deposits to other avenues such as mutual funds, banks are deploying a range of strategies, including leveraging branch networks, launching special fixed deposit schemes, and offering rewards through debit and credit cards.
Several banks, including State Bank of India, Bank of Baroda, and Bank of Maharashtra, have rolled out fixed deposit schemes with innovative tenures such as 444 days, 333 days, and 200 days. These schemes are designed to attract depositors by offering competitive rates and capturing attention through unique term structures.
Public sector banks are particularly focusing on their extensive branch networks, targeting customers who visit branches but do not hold accounts with them. Despite the widespread use of digital channels, which offer a broad reach, these channels have not yet generated substantial deposit volumes. Accounts opened digitally tend to have significantly lower initial deposits compared to those opened through personal interactions at branches.
To incentivise deposit growth, banks are enhancing their appeal by offering reward points and cash-back offers on debit and credit cards. These incentives aim to encourage customers to use their accounts as primary accounts for transactions, thereby increasing deposit volumes.
What FM says
Finance Minister Nirmala Sitharaman had called on banks to refocus on their core banking activities, particularly the mobilization of deposits and lending to those in need of funds. Her remarks come amid ongoing discussions about the role of banks in supporting government initiatives and the broader economy.
Sitharaman emphasised the importance of traditional deposit collection methods. She encouraged banks to make deposits more attractive, noting that the Reserve Bank of India (RBI) has provided banks with some flexibility in managing interest rates. Banks should take advantage of this liberty to enhance deposit mobilisation efforts,” she said. RBI Governor Shaktikanta Das highlighted the current stability of interest rates in India, describing them as “fairly stable.”
However, he pointed out a significant gap of 300-400 basis points between credit and deposit growth, cautioning banks about potential structural issues related to liquidity management.
