Finance Minister Nirmala Sitharaman on Saturday urged banks to focus more on core banking business, which is mobilising deposits and lending to those who need funds. Meanwhile, RBI (Reserve Bank of India) Governor Shaktikanta Das said that the interest rate in India as of now is fairly stable.

Sitharaman and Das along with Minister of State in the Finance Ministry Pankaj Chaudhary were addressing a press conference after customary board meeting of the RBI.

Calling the deposit and credit as two wheels, she said that while one wheel (deposit) is slow, second wheel (credit) is fast and this needs to be corrected.

“I will be meeting with the bank for various reasons to take up government’s priority sector lending area emphasis on some of the government schemes and also in that process talking to them about how it is important for them to go back to collecting deposit the old fashion get back soon collect deposit from everybody which means banks RBI has given them some liberty in managing the interest rate you think that liberty they should make deposit attractive in the banks,” she said.

Adding to that Das said there is 300-400 basis points gap between credit and deposit and RBI is advising bank on that.

“It is a kind of a proactive caution for the bank management that going forward this may create structural issues with regard to liquidity management and as it stands today we don’t see a crisis or anything but it has to be attended and it has to be dealt with by the individual bank,” he said.

When asked about hike in interest rates by banks on both deposits and credits and is this indicating trend of higher rate, Das said: “Banks fix their deposit rates, and they fix their interest rates. The position of the situation could vary from bank to bank. I think our real interest rates have not been very volatile. They’re fairly stable.”

Sovereign Green Bonds

On the issue of Sovereign Green Bond, the Governor informed trading of sovereign green bonds can commence at the International Financial Services Centre in Gujarat during the second half of the current fiscal.

“We are in discussion with the IFSC, it will be operationalised very soon. I think in the second half (of the current financial year), it will be possible,” Das said.

The government has been raising funds through green bonds since 2022-23 and has raised a total of ₹36,000 crore in the last two years.

So far in the current financial year, the government has raised only ₹1,697 crore out of the stipulated ₹12,000 crore scheduled to be raised in the first half ending in September through green bonds as it did not find favourable bids.

Asked about the tepid response from investors to such bond issuance, Das said, “as the debt manager of the government, we are watchful of what exactly is happening and if something needs to be done we will interact with the government and deal with it.”

He further said, one major announcement in this year’s budget about developing climate taxonomy. “I think that will have a significant long-term impact on mobilisation of funds for the green sector, not only through green bonds but also overall financing of the green sector,” he said.

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