Deposits the Bread and Butter of Banks and THE DEPOSITORS as well.

 

         

          Deposits the Bread and Butter of Banks and the Depositors as well.

This refers to the  news report ' FM tells lenders to bulk up Deposits (ET 11th Aug)' .The need to enhance the deposits of banks is sine qua non for not only for  banks but also for the economy to realise the dream of the PM to make the  economy fastest growing  and realise the dream of our PM  to take the nation forward and outsmart other advanced economies to reach on top of the world by 2047. Banks, the most powerful engine for the growth of the economy, need to mobilise the savings of the masses particularly the household savings  lying in different forms searching for better returns, safety and liquidity despite high inflation, dwindling deposit rates, varieties of taxes  and risks of loss of savings itself in speculative ventures.Even the RBI Governor has goaded the banks to find innovative ways to augment deposits and minimise the mismatch between the deposits growth and credit growth. The fact that both the FM and the RBI Governor have  echoed the  same views on the need  for banks to augment deposits by all means , it should make the policy makers to introspect deeply on  arriving at the fundamental causes that lead to erosion  in  deposits, household  financial savings , diversion to speculative savings to make a little extra and think of a fresh approach to have well coordinated  fiscal and monetary policy measures through a well thought out economic policy. While the  Fiscal policy of the Government  can definitely incentivise the savers and banks to augment the deposits through tax changes  , the monetary policy of the RBI can definitely influence the banks to have innovative ways to attract deposits and quality credit deployment . Added to these, better, meaningful, result oriented administrative initiatives in enhancing the quality of Customer Service intended and rendered by banks at the ground level can do wonders in augmenting the deposits by leaps and bounds.  As long as the real rate of interest earned remains 0 or negative because of inflation and high cost of living , the banks cannot expect to mobilise  household savings and public cannot be expected to provide any  emotional and economic support  to the Government for all its economic development. Ground realities at micro level need to be understood and factored into while making economic policies  by policy makers and administrators while implementing the policies.       

Though  the  Middle class remains the backbone of any nation and the banking system remains the backbone of the economy the approach and treatment meted out to  the middle class  need to be reexamined, reviewed and effectively  managed diplomatically, logically, politically, financially  and socially in letter and spirit. Hope some sensible and noble thoughts and actions would follow from the authorities for a change in outlook in policies aiming at the welfare of the masses all round and  betterment of the economy covering all segments of the economy and faster growth of the country. 

Loka Samastha Sukhino Bhavanthu. 

T V G Krishnan

(personal Views )