Banks Seek Innovative Deposit Products to Bridge Growth Gap with Rising Credit Demand

New Delhi, Sep 7 (KNN) In response to asymmetrical growth between deposits and credit, banks are exploring the development of innovative products to attract depositors who have shifted funds to alternative investments, according to industry sources.

This move comes as mutual funds and equity markets currently offer more attractive returns compared to traditional bank deposits, reported businessline.

Banking officials have issued a word of caution to investors, highlighting the potential risks associated with market investments.

They emphasised that bank deposits provide safe and consistent returns, especially in the event of a market correction from current highs.

Reserve Bank of India (RBI) Governor Shaktikanta Das, speaking at a conference on Thursday, presented the latest data showcasing strong credit growth across various sectors.

According to Das, credit to agriculture and allied activities has seen a robust increase of 18.1 per cent year-on-year.

The industrial sector has also witnessed significant growth, with overall credit surging by 10.2 per cent year-on-year in July 2024, a substantial increase from the 4.6 per cent growth recorded in July 2023.

Within the industrial sector, the MSME segment has shown particularly strong performance, with credit growth of 14.4 per cent year-on-year.

Governor Das also highlighted several industries that experienced significant credit expansion in July 2024.

These include chemicals and chemical products, food processing, petroleum, coal products and nuclear fuels, and infrastructure.

The growth in these sectors underscores the broad-based nature of the credit uptick.

Governor Das expressed optimism about the economic outlook, stating that the enhanced credit flow to industry, coupled with record-high capacity utilisation, suggests an upturn in the investment cycle.

This assessment is corroborated by recent data from the National Statistical Office (NSO), further reinforcing the positive trend in economic activity.

As banks navigate the challenge of balancing deposit growth with rising credit demand, the financial sector appears poised for a period of innovation and potential product diversification.

The coming months may see a range of new offerings from banks as they seek to recapture depositor interest while maintaining their robust lending activities.

(KNN Bureau)