RBI Deputy Governor Highlights Shift in Household Savings

RBI deputy governor Rajeshwar Rao has pointed out a significant shift in household savings from traditional bank deposits to mutual funds and capital markets. This trend, according to Rao, could have profound implications on the cost of funds and margins for banks.

Challenges in Deposit Management

Rao emphasized that while the total volume of deposits might not change, the shift in preferences poses challenges for deposit management and could lead to increased funding costs for banks. He made these remarks during his speech at the Mint BFSI summit in Mumbai.

Call for Diversification and Stress-Testing

He also warned against over-reliance on wholesale funding, urging banks to develop more sophisticated stress-testing methodologies and maintain adequate liquidity buffers to mitigate risks. Rao also touched upon the role of NBFCs, stressing the need for them to diversify their funding sources.