Banks borrow more than they raise deposits to fund loan demand
deposits — Rs 1.02 lakh crore in early July, according to the latest Reserve Bank of India data (RBI) data, highlighting the challenges faced by banks in attracting depositors.
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The war for deposits is set to intensify since budget has not announced any measures to attract depositors as regulators as well as the government have been directing banks to focus on core business of mobilising deposits.
Aggregate borrowings by banks at the system level amounted to Rs 8.83 lakh crore according to the RBI data published in its in its weekly statistical supplement (WSS) and it indicates the extent of non-deposit resources used to fund loan demand. An analysis of long-term data shows that such borrowings at the system level have gone up after the merger of the HDFC with HDFC Bank.
According to the RBI's handbook on WSS " Borrowings represent the total borrowings from outside the banking system apart from domestic borrowings. It also includes loans/borrowings from abroad by banks in India. Borrowings from the Reserve Bank of India are excluded from this item" These typically include short-term debt, infra bonds and even overseas debt.
The country's largest lender State Bank of India among others raised Rs 10,000 crore worth infrastructure bonds during the fortnight of July 12 which is reflected in such borrowings.
" This is mainly due to a large size of
