Banks are advised to change business plans where loan growth is higher than deposits

Mumbai: The Reserve Bank of India (RBI) has expressed concern over the growing gap between credit and deposit growth and has suggested that the country's banks should change their business practices. Credit growth is higher than deposits in the banking system.

According to the data for the fortnight ended May 17, loan growth was 19.50 percent while deposits grew by 13.30 percent. Although banks have been trying to increase deposits for the last one year, the expected increase in deposits is not being seen.

Banks are facing liquidity problems due to higher loan growth than deposits. Keeping this fact in mind, bank boards should consider changing their business plans, said Reserve Bank Governor Shaktikanta Das. The deposit-to-loan ratio is currently at a decade high of 80 percent.

Which shows that there is no increase in deposits compared to loans in the banking system. It was also said that the restrictions imposed by the Reserve Bank on unsecured retail loans and excessive dependence on banks for funding by NBFCs are having little results.