Reserve Bank of India (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 have already initiated to pass on the hike in repo rates to their depositors and the trend is 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 RBI money on a perennial basis to support credit offtake, and they have to mobilise their own resources and funds," the RBNI Governor told reporters during the post policy meeting.
The six-member Monetary Policy Committee (MPC) on Friday increased the repo rate by 50 basis points to 5.40 percent. This is the third hike 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 percent. The consumer price index (CPI) based inflation stood at 7.01 percent in June.
In May, RBI hiked the repo rate by 40 basis points and by another 50 basis points in June. Following these rate hikes, many banks have increased their deposit rates to some extent. RBI's Deputy Governor Michael Patra said there was a very aggressive deposit mobilisation starting with the bulk deposits. "We expect deposit mobilisation to catch up with the credit very quickly," Patra said