Banks cannot perennially rely on RBI money to support credit offtake: Das

Mobilise more deposits to aid credit growth, RBI Governor urges banks

RBI Governor Shaktikanta Das on Friday said banks cannot perennially rely on the central bank's money to support credit offtake and they needed to mobilise more deposits to aid credit growth.

He said banks had already started to pass on the increase in repo rates to their depositors and that the trend was expected to continue.

"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 told reporters during the post-policy meeting.

The six-member Monetary Policy Committee (MPC) on Friday raised the repo rate by 50 basis points to 5.4% and also decided to remain focussed on withdrawal of accommodation to ensure that inflation remained within the target going forward, while supporting growth.

This is the third increase in a row by the RBI since May this year in its fight against inflation which has been hovering above the central bank’s tolerance band of 4-6%. The consumer price index (CPI)-based inflation stood at 7.01% in June.

In May, RBI raised the repo rate by 40 basis points and followed it with another 50-basis point increase in June.

Following these rate increases, many banks have increased their deposit rates to some extent.