New Delhi. For some time now, loan growth has been consistently higher than deposit growth. This means that people are taking loans from banks in large amounts, but are not depositing their money in the same proportion. If this trend continues, the banking system may face a cash crisis. This has been said in a report by FICCI and IBA.

Focus on increasing deposit growth

This report suggests that banks can focus on increasing deposit growth to match loan growth. Also, keeping the cost of debt low is also at the top of their agenda. Recently, Finance Minister Nirmala Sitharaman also stressed that banks should offer attractive interest rates to increase deposit growth. This will encourage people to deposit money in banks.

Citing a survey, the FICCI and IBA report said that more than two-thirds of banks (67 per cent) reported a decline in the share of current account savings account (CASA) deposits in total deposits. However, the report also said that fixed deposits (FD) have increased due to high and attractive rates.

CASA deposits declined

80 per cent of the banks participating in the survey reported a decline in the share of CASA deposits during the first half of 2024, while more than half of the private sector banks reported a decline in CASA deposits. The 19th round of the FICCI-IBA survey was conducted for the period January to June 2024.

A total of 22 banks, including public sector, private sector and foreign banks, participated in the survey. These banks represent about 67 percent of the banking industry. Most (71 percent) of the banks reported a reduction in NPA levels during the last six months. The survey findings show that long-term loan demand for sectors such as infrastructure, metals, iron and steel remains strong.