Indian banks are expected to see improvements in their loan-to-deposit ratios after a large majority of them reported increases in the April-June quarter.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

According to data compiled by S&P Global Market Intelligence, HDFC Bank Ltd, reported the largest increase in loan-to-deposit ratios, which jumped 19 basis points to 107.26 per cent in the quarter from 87.91 per cent a year ago.

State Bank of India, the largest bank by assets, reported a ratio of 77.33 per cent in the first quarter, up from 72.21 per cent in the prior-year period, data compiled by financial information and analytics firm S&P Global Market Intelligence showed.

The debate on loan-to-deposit ratio imbalance and its potential risks to financial stability has been raised by even the finance minister and the RBI governor recently.

Finance Minister Nirmala Sitharaman had also urged state-run banks to enhance deposit mobilization through attractive offers, particularly focusing on Tier-2 and Tier-3 cities.

Customers who earlier used to park their hard-earned savings at banks are presumably opting for high-yielding, booming investment assets, including stock markets and mutual funds.

Finance Minister Nirmala Sitharaman, during her meeting with heads of public sector banks last month, suggested that while the credit growth has picked up, the mobilization of deposits could further be improved to fund the credit growth sustainably.

She had asked banks to make concerted efforts to garner deposits by conducting special drives.

"Either the loan growth has to come down or the deposit rates have to go up," Hemindra Hazari, a veteran analyst who has specialisation in banking and the macro-economy told ANI over phone.
Providing lucrative schemes to depositors may also solve the problem, he added.