The Reserve Financial institution of India (RBI) has sought ideas from banks on permitting lower than seven days time period deposits, folks aware of the matter stated. The transfer comes within the backdrop of stagnating deposit progress, which slowed to 10% year-on-year as of Might 02, 2025, towards 13% a 12 months earlier.The banking regulator …
The transfer comes within the backdrop of stagnating deposit progress, which slowed to 10% year-on-year as of Might 02, 2025, towards 13% a 12 months earlier.
The banking regulator had in 2004 lowered the minimal tenure for home and non-resident peculiar or NRO time period deposits to every week from the sooner restrict of 15 days.
Banks are anticipated to submit their responses inside this month, they stated.
RBI had final month individually held discussions with State Financial institution of India, Punjab Nationwide Financial institution and even personal sector lenders corresponding to Axis Financial institution on the problem, stated a senior financial institution govt.
ET Bureau“The transfer could enable banks to set their very own tenure, boosting mounted deposit attractiveness and liquidity within the banking system,” stated the financial institution govt.
He stated these are preliminary discussions and the RBI has not indicated whether or not it would let banks determine their very own tenure.
An electronic mail despatched to the RBI didn’t elicit a response until press time.
The Indian Banks’ Affiliation (IBA) will ship its suggestions by month finish after holding discussions with a wider set of banks.
Nevertheless, not all banks are enthusiastic in regards to the proposal.”Some banks have made ideas towards eradicating the minimal week-long tenure for mounted deposits and cited asset legal responsibility mismatch (ALM) as the important thing obstacle,” stated the chief quoted earlier.
An ALM danger arises when belongings and liabilities have completely different maturities-for instance short-term deposits are used to fund longer-tenure loans. This could additionally result in liquidity danger for banks.
An govt director with a state-run financial institution stated that shorter tenure mounted deposits, lower than seven days, could present alternatives for corporates to earn higher returns on their short-term surpluses however could not assist banks a lot.
“Banks will discover it tough to search out avenues to lend such short-tenure loans, like for 5 or three days. Even right now, most of those seven- to 10-day loans are to cowl foreign exchange transactions,” he stated.
In accordance with the most recent report from SBI Analysis, the fast transmission of charge cuts means deposit charges would come beneath fast downward strain, guaranteeing deposit mobilisation stays a Herculean problem for banks.
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