SBI chief Dinesh Khara sees a 'ghar wapsi' for deposits amid regulatory action on F&O

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. "Those who are resorting to such kind of an instrument, they might come back to the banking system," Khara told a news agency.

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%.