Bank deposit growth depends on economic growth, high income: RBI Study

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The Reserve Bank of India (RBI) study has said that the accelerating rate of economic growth and disposable income holds the key to higher deposit mobilization by the banking system.

RBI

According to the study titled,’ Bank Deposits: Underlying Dynamics’, outstanding deposits of scheduled commercial banks (SCBs) at Rs 1,25,726 billion, as on March 31, accounted for 128.7 percent of outstanding bank credit compared with 132.5 percent a year ago. This reflects the tightening of financial conditions due to low deposit growth.

The central bank has taken several initiatives in recent months to address the issue of structural liquidity gap including Open Market Operations and dollar rupee swap auction.

RBI officials Harendra Behera and Dirghau K Raut (Department of Economic and Policy Research), and Arti Sinha (Department of Statistics and Information Management) stated in the study that, “Close co-movement is visible between variations in deposit growth and interest rate — a downward slide till November 2017 . “

” However,  the deposit growth is picking up in recent months in a cyclical upturn since December 2018, which is overwhelming a trend slowdown that has been underway since October 2009, ” the study stated.

The RBI in a disclaimer said that views are of authors and do not represents the views of the central bank.

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