There has been a noticeable trend of households increasingly shifting their investments to capital markets and other financial intermediaries, said the Reserve Bank of India (RBI) Governor on Friday 19 July at an industry event. Das said the trend has led to a decline in the share of bank deposits.
He also highlighted the lag in deposit mobilisation compared to credit growth, called it a “critical issue” and requested banks to focus on robust credit underwriting. India’s financial landscape is undergoing a structural shift and the Reserve RBI is encouraging innovations to make it more inclusive, listing deposit mobilisation and frauds as issues being tracked.
The governor also raised concern about the rise in digital frauds, particularly those involving the so-called mule bank accounts. The RBI is monitoring accounts that have unusual activity at odd hours or sudden volume increases in previously inactive accounts, he said. He urged banks to enhance their monitoring systems to detect and prevent such fraudulent activities.
Last week RBI Deputy Governor also expressed concerns over fraudulent transactions and stressed the need for long-term solutions that address the root causes of the problem. "Rather than implementing short-term fixes, understanding and addressing the underlying causes of these issues ensures that compliance is sustained over the long term."
Talking about the challenges in the banking sector, the governor noted that increasing the share of retail portfolios poses potential risks. The RBI has taken steps to mitigate these risks, focusing on delinquency levels and limits on small unsecured loans, which remain a point of concern. Excessive interest rates in microfinance loans were also a cause of worry.
The RBI is preparing plans to tackle climate-related risks and provide climate financing. He cautioned against the risk of greenwashing and emphasised the need for vigilance in this area, he added.
