Make Deposits Great Again | Letter to the Editor

From:s_ketharaman@yahoo.com
To:editet@timesgroup.com
Date: 11 July 2024

Dear Editor of Economic Times:

This has reference to the op-ed titled “Make Deposits Great Again” by Ateesh Tankha and Ganga N Rath.

I agree with the overall message of the article that growth of Indian economy requires more credit, not less credit.

However, I have mixed views about the rest of the article.

I don’t know a single Indian who hesitates to put money in a bank fixed deposit because it’s insured only up to INR 5 Lakhs. In fact, a vast majority of Indians are not aware of the very concept of deposit insurance, let alone that it’s capped at INR 5L. Most Indians consider bank deposits as absolutely safe because a vast majority of banks are owned by the government, which conveys the impression that bank deposits are covered by sovereign guarantee (although they are not). On the other hand, tons of people are reluctant to invest in mutual funds, let alone enter equity directly, because they don’t provide capital protection guarantee (which bank deposits do.)

I don’t disagree with the authors’ recommendation to the government to make bank deposits more attractive but, at the same time, India needs to explore other avenues of credit. The one that comes readily to mind is private credit. Private credit became popular in USA after banks became reluctant to lend to certain market segments due to the new credit quality rules that came into force after the Great Financial Crisis of 2008.

Thanks and Regards.

KETHARAMAN SWAMINATHAN

Pune, INDIA