Discouraging retail play in F&O may help boost bank deposits: SBI Chairman Khara

NEW DELHI: SBI Chairman Dinesh Kumar Khara said that regulatory actions discouraging retail investors “derivative market bets may help the banking system garner the much-needed deposits, however the budget announcements, such as the adjustments to short-term and long-term capital gains, will not contribute to deposit accretion.
“F&O (future and options) kind of things are being discouraged for the retail (investor) by the regulator.Those who are resorting to such kind of an instrument, they might come back to the banking system,” Khara told PTI.
Concerns over “losses incurred by 90 percent of investors in the derivative trades” have amplified these fears. The possibility of household savings being “blown in speculation rather than being deployed for productive purposes” remains a key worry among policymakers.
According to the Securities and Exchange Board of India (Sebi) said that retail investors experienced a staggering loss of “Rs 52,000 crore in such activity in FY24 alone” highlighting the urgent need for a clampdown.
Sebi has come up with a comprehensive seven-point plan aimed at curbing such trades, additionally, the Union Budget has also introduced measures specifically designed to reduce these speculative activities.
Over the past three years, deposit growth has not been able to match the pace of credit expansion. According to Khara, the money is going into alternative avenues like capital markets.
Despite, Khara noted that bank accounts remain the primary vehicle for saving money and continue to offer attractive interest rates and pointed out that there was a similar phase in 2011, when the banking system experienced a period of deposit growth lagging behind credit growth.
Currently, there are growing concerns about the widening gap between deposit and credit growth, which may lead banks to slow down their lending activities which could have negative consequences for overall economic growth.
SBI which holds over a fifth of market share, aims to achieve a credit growth of 15 per cent and a deposit growth of 8 per cent in the fiscal year 2025, said Khara.
Although SBI will strive to increase its deposit growth to 10 per cent, Khara stressed that the credit growth target is attainable even with a slower deposit growth rate of 8 per cent, due to its liquidity position.
In the past, SBI opted to allocate its excess deposits to its investment portfolio, and currently its unwinding the same as it caters to the credit demand, Khara said.
SBI’s liquidity coverage ratio currently stands at 128 per cent, and the bank has resolved to maintain it above 110% going forward, he further added.
(With inputs from agencies)