Discouraging retail participation in F&O may boost bank deposits: SBI Chairman
Khara noted that recent budget adjustments, such as modifications to short-term and long-term capital gains tax, are unlikely to improve deposit growth.
SBI Chairman on F&O regulation: Regulatory efforts to curb retail investor activity in the derivatives market could aid banks in increasing their deposit base, according to Dinesh Kumar Khara, Chairman of the State Bank of India (SBI).
Khara noted that recent budget adjustments, such as modifications to short-term and long-term capital gains tax, are unlikely to significantly improve deposit growth. Instead, he pointed out that regulatory measures aimed at reducing retail involvement in futures and options (F&O) could encourage these investors to return to traditional banking channels.
The capital markets regulator, Sebi, has observed substantial losses among retail investors in derivatives trading, with reported losses of Rs 52,000 crore in FY24 alone. This has prompted Sebi to implement a seven-point plan to mitigate such activities and address concerns that retail savings are being diverted into speculative trading rather than productive investments.
Over the past three years, deposit growth has lagged behind credit expansion, with funds shifting towards alternative investment avenues like capital markets. Khara highlighted that despite this, bank accounts remain a fundamental vehicle for saving and earning interest.
Currently, there is concern that the disparity between deposit and credit growth might lead banks to slow down on loan disbursements, potentially affecting overall economic growth. SBI, holding over 20 per cent of the market share, is aiming for a 15 per cent increase in credit growth for FY25 and an 8 per cent rise in deposits. However, Khara indicated that a deposit growth rate of 8 per cent would still allow the bank to meet its credit growth targets due to its strong liquidity position.
SBI has previously invested excess deposits into its investment book but is now reallocating these funds to meet credit demand. The bank’s liquidity coverage ratio is currently at 128 per cent, with plans to maintain it above 110 per cent.
(With PTI inputs)
Published By : Anirudh Trivedi
Published On: 4 August 2024 at 14:46 IST