There may be a huge fall in the deposits of banks during the festive season, liquidity decreased for the first time in 40 months

As per the report, as the festive season picks up, the liquidity will further reduce. Apart from this, people also keep a lot of cash during this time.

Indian banks may face a shortfall in deposits in the coming festive season. These banks may be forced to face stiff competition amid an already cash crunch and rising debt. During festivals, there is a sudden outflow of money from banks because a large number of customers make purchases during this period. Earlier this week, for the first time in 40 months, the indian banking system faced a liquidity crunch.

Suresh Ganapathy, head of financial research at brokerage house Macquarie, said, "We expect banks to face a challenge amid growth in deposits and credit. Because the growth rate of deposits is only 9.5 percent and the growth of credit is above 15.5 percent.

As per the report, as the festive season picks up, the liquidity will further reduce. Apart from this, people also keep a lot of cash during this time. This will further reduce liquidity. L&T Financial Chief Economist Rupa Rege Nisture said banks have been behind in raising deposit rates due to excess liquidity in the system. However, the interest on the loan increased immediately. Therefore, banks will now have to increase the interest on deposits. Banks rely heavily on bulk deposits and this is bad for them.

Banks are of the view that funds to support development cannot be raised through debt alone. Therefore, interest rates will have to be raised more aggressively in the coming months. sbi is currently giving 5.45 percent interest on deposits of one to two years. Whereas on bulk deposits it is 6 percent. “Usually, the demand for loans picks up in the second half and hence we expect interest on deposits to increase as well,” said an official.