Banks borrow more than they raise deposits to fund loan demand

In early July, Indian banks borrowed a record Rs 1.19 lakh crore from the market due to challenges in attracting deposits, which totaled Rs 1.02 lakh crore. The Reserve Bank of India data revealed this borrowing trend as a result of the budget's lack of deposit-attracting measures. Total bank borrowings reached Rs 8.83 lakh crore, influenced by the HDFC and HDFC Bank merger. This includes short-term debt, infra bonds, and overseas loans but excludes RBI loans. The State Bank of India raised Rs 10,000 crore through infrastructure bonds. Experts cautioned that an aggressive move to increase deposits could lead to a rate war and widen the credit-deposit gap, causing liquidity and repricing risks. However, the situation has been improving with the RBI's large dividend transfer.