Bank-targeted mutual funds clash as deposits fall

Deposits: Declining growth rate of deposits has created panic in the country's banking and mutual fund sectors. Deposits in banks are decreasing, while deposits made by investors in mutual funds through Systematic Investment Plan (SIP) continue to increase. Due to this, there is a direct impact on the credit disbursement activities of banks. In recent days, Reserve Bank of India (RBI) Governor Shaktikanta Das has expressed concern over the slowing deposit growth of banks. Following this, at the Indian Bankers Association (IBA) event held in Mumbai on Thursday, its president M. Venkata Rao (MV Rao) slammed the country's banker mutual fund sector. IBA blames decline in deposits in banks in mutual fund schemes. IPA President MV Rao said that mutual fund companies will provide more returns to investors due to easier rules. Due to this, retail investors do not deposit their money in banks. Investment of funds for banks is dictated by regulations, whereas MF firms have no such restrictions, said Central Bank of India Governor MV Rao, who cannot issue instructions to clients. He said MF firms do not face any end-use verification and banks cannot direct customers to keep their funds with them. He said 99% of mutual fund investors don't do any research. They work as a team to make bets that lead to dangerous results. Blaming mutual funds for falling deposits is wrong: Nilesh Shah In response to IPA chairman MV Rao's attack on deposits and returns, Kotak Mutual Fund Managing Director and Chief Executive Officer (CEO) Nilesh Shah expressed his inability to understand the claim. How can mutual fund companies be blamed for the slow pace of deposit growth in banks, he asked. Nilesh Shah, a member of the Prime Minister's Economic Advisory Council, attributed the slow growth in deposit growth to the outflow of government reserves from the banking system, the existence of small savings schemes and keeping currency supply in the exclusive domain of banks. Nilesh Shah said in all markets of the world, including the US, that the remaining amount should be deposited in banks, clarifying that such allegations do not exist when deposit growth is weak in the world's largest economy. He has asked Chief Economic Adviser V. Anand Nageswaran to ensure that government balances are deposited in banks, thereby earning the government up to Rs 12,000 crore in interest annually. Also Read: If you have opened your daughter's account in Sukanya Samriti Yojana, save it, otherwise it will be closed after more than one year banking system. In such a scenario, concerns are raised about the ability to maintain credit demand. Expressing concern, RBI Governor Shaktikanta Das said that savers prefer to invest their money in high-yielding mutual funds (MFs) and this is confirmed by the rise in monthly inflows of mutual fund management companies. Also Read: Gold prices rise on Hartalika Teej, silver at Rs. 1000 was awarded. The post Deposit Shortage, Mutual Funds Clash Targeting Banks appeared first on Prabhat Khabar.