When cheap loans were available, people rushed to take them, but the banks ran out of money! Know why there was pressure on banks? – ..

RBI Repo Rate: Nowadays, taking a home loan, car loan or personal loan has become cheaper than ever. The main reason for this is the reduction in interest rates by the Reserve Bank of India (RBI). But there is another aspect of these cheap loans, which is having a direct impact on banks and your savings. According to new data, people are not depositing money in banks as fast as they are taking loans. Because of this, the pressure on banks to raise funds is increasing.

What do the statistics say?

According to the latest RBI data, loans given by banks increased by 11.42% in the fortnight ended November 28. On the other hand, deposits in banks increased by only 10.19%. This simply means that there is a difference of 1.23% between the demand for loans and the amount of deposits. Talking about a year ago, both these figures were equal to 10.58%, which indicated a balanced situation. But now the situation has changed.

Why did demand for loans increase and deposits decrease?

The main reason behind this situation is the policy of RBI

Repo rate cut: RBI has reduced the repo rate by a total of 1.25% since February this year. Due to reduction in repo rate, it has become cheaper for banks to take loan from RBI, the banks are taking advantage of this by giving cheap loans to the customers. For this reason the demand for loans has increased.

Lower returns on deposits: On the other hand, banks have also reduced interest rates on deposits (such as fixed deposits) to make loans cheaper. Due to low returns, people are now preferring to invest in more profitable options like stock market (equity), debentures and gold and silver instead of keeping money in banks. As a result, the pace of new deposits in banks has slowed down.

What effect will this have on banks?

Banks use money deposited by the public to give loans. When demand for loans is high and deposits are low, banks do not have enough funds. To meet this demand, the pressure on banks to raise funds increases.

What are the government and RBI doing?

To deal with this situation and provide adequate funds in the market, RBI has taken several steps:

Open Market Operation (OMO): RBI will purchase government securities worth Rs 1 lakh crore from the market to increase cash flow in the banking system.

Dollar-Rupee Swap: Additionally, money will also be made available in the market through purchase/sale of Rs 5 billion per dollar.

According to the data, as of November 28, there were total deposits of Rs 242.60 lakh crore and outstanding loans of Rs 195.30 lakh crore in the banking system. These figures show that demand for credit is necessary to boost the economy, but the financial stability of banks is equally important.