RBI MPC comment
Banks are urged to improve the attractiveness of deposits for their clientele. They often prioritize raising rates for large corporate deposits, which can swiftly shift to more favorable opportunities, while overlooking retail deposits, which constitute the majority of long-term liquidity for banks. However, depositors have alternative investment options, and the costs associated with transferring funds are declining. Moreover, given the competitiveness of loan rates, banks must enhance efficiencies to sustain profitability despite narrower net interest margins.
Ashima Goyal, an external member of the Reserve Bank of India‘s Monetary Policy Committee (MPC), asserts that banks commonly provide more favorable interest rates for non-sticky bulk corporate deposits. Goyal emphasizes to Piyush Shukla the necessity for lenders to enhance interest rates to appeal to retail customers, who contribute the majority of long-term liquidity.
