Arundhati Bhattacharya Urges Banks to Adapt to Changing Investment Trends
In a recent conversation with CNBC-TV18, Arundhati Bhattacharya, former Chairperson of State Bank of India (SBI) and current CEO of Salesforce India, shared critical advice for Indian banks. She pointed out that the younger generation no longer relies on traditional bank deposits and is leaning towards higher-risk investments. Bhattacharya highlighted the need for banks to acknowledge this shift and adapt their strategies accordingly.
Youth Are More Willing to Take Risks with Their Investments
Bhattacharya explained that today’s youth are much more open to taking risks compared to previous generations. Unlike their parents, who preferred safe investment options like fixed deposits, today’s young professionals are increasingly choosing riskier avenues like stocks and mutual funds.
She emphasized the role of the Systematic Investment Plan (SIP) in enabling people to invest small amounts in mutual funds, which eventually get invested in the stock market. “Even with Rs 2000, anyone can now enter the market. It’s accessible, and that’s why fewer people are relying on bank deposits for their savings,” she said.
Bank Deposits Are Losing Popularity as a Preferred Savings Option
According to Bhattacharya, the era when people solely relied on banks for their savings is over. She noted that many households now prefer to invest in equity schemes rather than parking their money in savings accounts. This has led to a widening gap between banks’ deposit growth and credit growth.
RBI Governor Shaktikanta Das also recently expressed concern about this issue, highlighting that fewer families are using bank deposits as their primary method of saving. Instead, they are choosing investment vehicles that offer potentially higher returns.
Banks Must Rethink Their Strategies for Growth
Bhattacharya suggested that banks should not depend only on deposits but should find a balance between deposits and market debt. This shift in strategy is critical as the traditional deposit-based banking model may not be sustainable in the future. She added that developed economies have already moved towards this more balanced approach, and Indian banks should follow suit.
“The banks’ treasury departments, often seen as inactive, will now need to play a more significant role in managing assets and liabilities,” she said. With the rise in market investments, banks will need to enhance their treasury operations to maintain financial stability.
Banks Face Challenges Amidst Growing Investment in Mutual Funds
As more people invest in mutual funds and other market-based options, banks are facing new challenges in managing liquidity and maintaining deposit growth. The shift in saving patterns means banks need to adopt innovative strategies to attract deposits while managing liquidity risks more effectively.
For Indian banks, adapting to these changes is crucial for long-term success in the evolving financial landscape.
