Regulatory Clampdown on Derivative Bets May Boost Bank Deposits: SBI Chairman

SBI Chairman, Dinesh Kumar Khara, comments on regulatory moves deterring retail investors from derivative markets. He believes it could help banks accumulate more deposits. Despite changes in capital gains taxes in the budget, Khara underscores banking as the primary savings avenue. Concerns rise over credit and deposit growth disparity.

SBI Chairman, Dinesh Kumar Khara, has stated that regulatory actions aimed at dissuading retail investors from engaging in derivative market bets might aid the banking system in attracting the necessary deposits.

Speaking to PTI, Khara noted that budget adjustments, such as those affecting short-term and long-term capital gains, are unlikely to significantly influence deposit accretion. He emphasized that regulatory discouragement of futures and options for retail investors could redirect funds back to banks.

Concerns have surged among policymakers about the losses incurred by 90 percent of investors in derivative trades, with SEBI reporting a Rs 52,000 crore loss in FY24 alone. SEBI has introduced a seven-point strategy to mitigate such trades, supplemented by budget measures aimed at curbing speculative activities.

The chairman highlighted a concerning trend where deposit growth has lagged credit expansion for three years, with alternative investment avenues like capital markets drawing savings away. Despite this, Khara remains confident in deposits as the main savings repository, noting past instances of similar trends.

He acknowledged ongoing worries about the gap between deposit and credit growth and its potential impact on economic progress. SBI targets a 15 percent credit growth and 8 percent deposit growth for FY25. Khara revealed efforts to achieve a 10 percent deposit growth rate, leveraging liquidity to meet credit growth targets even at an 8 percent deposit growth pace.

SBI has been reallocating excess deposits from its investment book to cater to credit demand, striving to maintain a liquidity coverage ratio above 110 percent, currently at 128 percent.

(With inputs from agencies.)