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BUSINESS EYE SEPTEMBER 23, 2022 | The Indian Eye 38

Fintechs poised for a giant

leap as Indian banks face liquidity

and credit problems

RBI governor says there are a lot of opportunities in not only enhancing the scope and

depth of the fintech segment but how it could deepen financial inclusion

OUR BUREAU
New Delhi/Mumbai
here is a dire warning to Indian banking
system. Indian banks may be forced to com-
Tpete harder to boost deposits amid tighten-
ing liquidity and rising credit demand ahead of the
festive season. Banking system liquidity slipped
into deficit for the first time in nearly 40 months
earlier this week, prompting the Reserve Bank of
India to infuse funds into the system.
Bank loans rose 15.5% in the two weeks to
August 26 from a year earlier, while deposits rose
9.5%, RBI data earlier this month showed. With
excess liquidity in the banking system over the last
couple of years on account of the cash infused by
the RBI during the pandemic, banks chose to rely
on raising funds from money markets to support
the prevailing demand for credit.
But with credit growth at multi-year highs, an-
alysts have warned that the RBI focusing on drain-
ing liquidity to curb inflation, the cheaper funding
avenues are drying up. Bankers agree that rely-
ing on the debt market to raise funds to support
growth may not be sustainable. “Borrowing from
the market to fund credit growth is just one of the
ways and after a while it isn’t sustainable. So, we
will have to start raising rates more aggressively in RBI Governor Shaktikanta Das and Co-founder and Non-Executive Chairman of Infosys Nandan Nilekani at Global Fintech Fest
the coming months,” said a senior executive at a in Mumbai on Wednesday (ANI)
state-owned bank, according to a report by Reuters.
The average amount of CDs raised by banks in
a month rose sharply to 400 billion rupees in first started lending more than the total deposits they In the matter of central bank digital curren-
quarter of FY23 compared with 260 billion rupees hold. cy (CBDC), he said the central bank is working
in the preceding quarter, according to a report by But, meanwhile, Reserve Bank of India Gov- on a phased implementation of CBDC in both
India Ratings. ernor Shaktikanta Das has said the fintech sys- wholesale and retail segments and that RBI had
Rates for bulk deposits, or deposits of over 20 tem in India has evolved and is poised for a giant proposed to first try it out in the wholesale before
million rupees, are rising more rapidly than retail, leap. He was speaking at the Global Fintech Fest expanding into the retail segment.
highlighting banks’ focus on raising more funds in Mumbai on Tuesday. “Technology, innovation He also mentioned that phased implementa-
quicker. State Bank of India’s 1 to 2-year retail and fintech are working in tandem and have con- tion will give further fillip to digital ecosystem of
term deposit rate has gone up by 15 basis points tributed a lot in this sector. In our journey towards the country. Stressing on fintech innovation, he
in August to 5.45%, while the bank raised the bulk a higher sustainable system of financial inclusion, said India has seen exponential growth for tech-
deposit rate for the same tenor by 75 bps to 6%. these forces have morphed into growth multipli- nology enablers.
“Credit growth typically picks up in the second ers in this sector. We have leveraged a lot on these. “Telecom penetration, availability of internet
half of the year and with the festival season and We need to leverage more,” Shaktikanta Das said. services, adoption of technological access to cred-
economy picking up we expect a strong demand, He said that there were a lot of opportunities it and deepening of financial inclusion have made
so deposit mobilization will increase,” said anoth- in not only enhancing the scope and depth of the significant progress in the financial sector and are
er banker to Reuters. fintech segment but how it could deepen financial continuing to make progress,” he said.
Analysts believe that as the scramble for de- inclusion in the country’s march over the next 25 Shaktikanta Das also added the regulatory
posit intensifies, banks may feel some impact on years when it will mark the 100th anniversary of sandbox was released in August 2019 with a view
their margins in the coming quarters. Independence. “If all of us are together, the regu- to foster innovation and that the RBI is in a select
The incremental credit deposit ratio has al- lator as well as the players, we can create a lot of group of countries which have their own regulato-
ready crossed 100%, suggesting that banks have milestones in our journey.” ry sandbox.

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