Banks are looking for innovative deposit products to bridge the growth gap amid growing demand for loans

New Delhi, September 7 (KNN) In response to asymmetric growth in deposits and loans, banks are exploring the possibility of developing innovative products that could attract depositors who have moved funds to alternative investments, industry sources say.

The business line said the decision was made because mutual funds and stock markets currently offer more attractive returns compared to traditional bank deposits.

Banking sector representatives issued a warning to investors, drawing attention to the potential risks associated with market investments.

They stressed that bank deposits provide safe and stable returns, especially in the event of a market correction from current highs.

Reserve Bank of India (RBI) Governor Shaktikanta Das, addressing a conference on Thursday, presented the latest data showing strong credit growth across sectors.

According to Das, credit to agriculture and allied sectors of the economy recorded a solid growth of 18.1 per cent year-on-year.

The industrial sector also saw significant growth, with overall excise duty increasing by 10.2% year-on-year in July 2024, up significantly from the 4.6% increase recorded in July 2023.

In the industrial sector, the SME segment performed particularly well, with loans increasing by 14.4 per cent year-on-year.

Governor Das also highlighted several industries that saw significant credit expansion in July 2024.

These include chemicals and chemical products, food processing, petroleum, coal products and nuclear fuels, and infrastructure.

Growth in these sectors underscores the broad-based nature of the credit recovery.

Governor Das expressed optimism about the economic outlook, saying increased credit flow to industry, coupled with record high capacity utilisation, indicated a revival in the investment cycle.

This assessment is confirmed by the latest data from the National Statistical Office (NSO), which additionally confirm the positive trend in economic activity.

As banks face the challenge of balancing growth in deposits with increasing demand for loans, the financial sector appears poised for a period of innovation and potential product diversification.

In the coming months, banks may launch a range of new offerings that aim to restore depositor interest while maintaining dynamic lending activity.

(KNN Office)