Real Estate
Bank Deposits May See a Surge as Regulatory Bodies Clamp Down on F&O Trading
By GeoSquare News Desk · Published 2024-08-05
Regulatory efforts to steer retail investors away from derivative market bets could significantly boost the banking system's deposits, says SBI Chairman Dinesh Kumar Khara. He noted that recent budget changes to short-term and long-term capital gains taxes are unlikely to drive substantial deposit growth.
Khara pointed out that regulatory bodies, especially SEBI, are discouraging retail investors from futures and options (F&O) trading. This move is expected to lead to a 'ghar wapsi' (homecoming) for deposits, as investors may shift their focus from speculative trades to more secure banking options.
Concerns have arisen due to significant losses by retail investors in derivative trades, with 90% of participants facing losses. Policymakers worry that household savings are being squandered in speculation rather than used productively. SEBI reported that retail investors lost Rs 52,000 crore in derivative trading in FY24 alone, prompting a regulatory clampdown.
SEBI has introduced a seven-point plan to curb such trades, complemented by measures in the Union Budget aimed at reducing speculative activities. Over the past three years, deposit growth has lagged behind credit expansion, with funds flowing into capital markets instead.
Khara emphasized that bank accounts remain the primary destination for parking savings and will continue to attract interest. He recalled a similar phase in 2011 when deposit growth trailed credit growth but eventually stabilized.
Current concerns about the gap between deposit and credit growth have led banks to slow down on granting loans, which could hinder overall economic growth. SBI, India's largest lender with over a fifth of the market share, aims for a credit growth of 15% and a deposit growth of 8% in FY25, according to Khara.
Khara stated that the bank will strive to achieve a 10% deposit growth rate, clarifying that the credit growth target can still be met with an 8% deposit growth due to its strong liquidity position. SBI has previously deployed excess deposits into its investment book and is now unwinding these to meet credit demand.
The bank's liquidity coverage ratio stands at 128%, and Khara mentioned that SBI has decided to maintain it above 110%.
State Bank of India (SBI) is an Indian multinational public sector bank and financial services statutory body headquartered in Mumbai, Maharashtra. SBI is the largest bank in India with a history of over 200 years.
The Indian government has been taking steps to reduce speculative activities in the capital markets, and SEBI has been working to curb retail investors' participation in futures and options trading.
Keywords F&O trading, regulatory clampdown, bank deposits, SBI, credit growth, deposit growth, liquidity coverage ratio
FAQs
Q What is the main reason behind the regulatory clampdown on F&O trading?
A The main reason is the significant losses incurred by retail investors in derivative trades, with 90% of participants facing losses.
Q What is the expected impact of the regulatory clampdown on bank deposits?
A The clampdown is expected to lead to a 'ghar wapsi' for deposits, as investors may shift their focus from speculative trades to more secure banking options.
Q What is the credit growth target for SBI in FY25?
A SBI aims for a credit growth of 15% in FY25.
Q What is the deposit growth target for SBI in FY25?
A SBI aims for a deposit growth of 8% in FY25.
Q What is the liquidity coverage ratio of SBI?
A The liquidity coverage ratio of SBI stands at 128%.