RBI Governor Shaktikanta Das on Friday said banks cannot perennially rely on the central bank’s money to support credit offtake and they need to mobilise more deposits to aid credit growth.
Indian banks cannot perennially rely on the central bank’s money to support credit offtake and they need to mobilise more deposits to aid credit growth, Reserve Bank of India Governor Shaktikanta Das said today. They need to mobilise their own resources and funds to aid credit growth, he said.
Banks have already started to pass on the hike in repo rates to their depositors and the trend is expected to continue, he said.
“When there is a credit offtake, banks can sustain and support that credit offtake only if they have higher deposits. They cannot be relying on the central bank money on a perennial basis to support credit offtake … they have to mobilise their own resources and funds,” Mr Das said.
The six-member Monetary Policy Committee (MPC) on Friday increased the repo rate by 50 basis points to 5.40 per cent and also decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.
With this, the RBI has effectively raised rates by 180 basis points since April. The Governor, however, retained India’s GDP projection of 7.2 per cent.