As we know, people usually deposit their surplus fund in banks mainly for safe keeping and earning interest on deposit. But, the interest rates against deposits in the country's banking system has nosedived to a worrying level that has made depositors as well as economists and policymakers worried. This motivated small and medium depositors to opt-out of the conventional banking system in the last couple of years which is a grim signal to the country's growth prospect.
Depositors are one of the major stakeholders of the banking system. Banks accept deposits from people having investible surplus for the purpose of lending. But people’s reluctance to keep their money in banks will cause capital deficit. The banking sector inflicted by default loan continues to bleed for capital deficit and is likely to suffer from the drastic fall in deposit due to the fallout caused by the loss of confidence of many individual depositors in the banking sector. In the wake of the downtrend in deposit, the banks will not able to provide loans to the private sector and thus dampen the economic development of the country.As reported, many banks are reluctant to offer attractive benefits to short and long-term depositors. And milking of the depositors reached the maximum level in the form of realisation of various types of accumulated charges, including source tax and excise duty levied by the banks.
Depositors find little incentive to depositing money with the banking system as the net interest income is very low. This hurts the habit of saving money for future investment. Such a habit of a large number of people is not conducive to the growth of the country’s economy.
It is important to devise and implement policies to ensure the benefit of depositors as well as banks. For a vibrant economy and the smooth journey towards the country's development goal, we must make sure that people feel motivated to deposit money in banks.