Indian Banks See Improvement in Loan-to-Deposit Ratios
HDFC Bank and SBI Lead the Way
Indian banks are expected to see improvements in their loan-to-deposit ratios after many reported increases in the April-June quarter. According to data from S&P Global Market Intelligence, HDFC Bank Ltd reported the largest increase, with its ratio jumping 19 basis points to 107.26% from 87.91% a year ago. State Bank of India (SBI), the largest bank by assets, reported a ratio of 77.33% in the first quarter, up from 72.21% in the prior-year period.
The debate on loan-to-deposit ratio imbalance and its potential risks to financial stability has been raised by Finance Minister Nirmala Sitharaman and the RBI governor. Sitharaman urged state-run banks to enhance deposit mobilization through attractive offers, particularly focusing on Tier-2 and Tier-3 cities. Customers are increasingly opting for high-yielding investment assets like stock markets and mutual funds instead of traditional bank deposits.
During a meeting with heads of public sector banks, Sitharaman suggested that while credit growth has picked up, deposit mobilization could be improved to fund this growth sustainably. She asked banks to make concerted efforts to gather deposits by conducting special drives.
Veteran analyst Hemindra Hazari, who specializes in banking and the macro-economy, stated, “Either the loan growth has to come down or the deposit rates have to go up.” He added that providing lucrative schemes to depositors may also solve the problem.
Doubts Revealed
Loan-to-Deposit Ratio -: This is a number that shows how much money a bank has given out as loans compared to how much money people have deposited in the bank. A higher ratio means the bank is giving out more loans.
HDFC Bank -: HDFC Bank is one of the largest private banks in India. It provides various financial services like savings accounts, loans, and credit cards.
SBI -: SBI stands for State Bank of India. It is the largest public sector bank in India, meaning it is owned by the government.
Finance Minister Nirmala Sitharaman -: Nirmala Sitharaman is a politician in India who is responsible for managing the country’s finances, including the budget, taxes, and government spending.
Analyst Hemindra Hazari -: Hemindra Hazari is a financial expert who studies and gives advice on banking and finance. Analysts like him help people understand how banks and the economy are doing.
Sustainable Credit Growth -: This means that banks should give out loans in a way that can be maintained over a long time without causing problems. It helps the economy grow steadily.
Deposit Rates -: These are the interest rates that banks pay to people who keep their money in savings accounts or fixed deposits. Higher rates can attract more people to deposit their money in the bank.
