Understanding Bank Deposits, Money Creation and Economic Growth

Tune in to the latest episode of the Open Dialogue podcast. The episode talks about the intricacies of Bank Deposits and how they play a key role in fundamentals of the banking system.

This podcast further explores Loan Deposit Ratio and debunks the myth if deposits fund loans or vice versa? Our speakers will be seen discussing the process of money creation and how commercial banks are an engine of money supply for the country. We also discuss in detail why deposit growths are lagging & the liquidity management framework.

Chapters -
0:00 - Introduction
4:00 - Do Deposits Fund Loans?
11:16 - How the Central Bank Creates Money?
14:13 - Are Deposits Falling?
16:15 - Impact of FII
21:31 - How does Money go out of the System?
30:11 - Why is Deposit Growth so sluggish?
39:40 - Process of Money Creation
48:50 - The Growth of Economy
52:48 - What is Overnight Liquidity?
1:00:30 - Conclusion

Speakers:
Sameer Shetty - President & Head, Digital Business & Transformation, Axis Bank
Neelkanth Mishra - Chief Economist, Axis Bank & Head of Global Research, Axis Capital

Open Dialogue:
The aim of Open Dialogue by Axis Bank is to bring to the fore nuanced and insightful discussions on macroeconomics and market-oriented subjects.

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[DeepSukhwani]

Amazed how few people understand this. Even professional bankers and so many so called long term banking system investors talk about one of the myths all the time as reason for low deposit issues

[RaviPanchal-rbfi]

Thank you Mr.Misra I have learnt a lot from you. Best Communicator

[AnujMohata-jo]

Sir the FPIs have been selling consistently & that results into Lower money in the system is that a Cause of lower deposits.

Means the person who is selling is a foreign entity & hence deposit is not being created in India

[prashantagarwal]

Reverse repo is not at 6.25% it is the SDF( Standing deposit facility) at 6.25% it works similar to reverse repo but without collateral requirement

[itssecret]

NIce video.

I didn't understood one thing, how is elevated LDR signify to consumer low confidence, if their deposit are not used to give loan (loan given is new money created), then how does elevated LDR signal to them that bank might not be able to give back your deposit. If a bank has 100 people who have deposited, bank never used those 100 deposit to give loan instead bank created money on fly when giving loan, that means they will always be able to take back their money, then why maintain this LDR ?


Neelkanth and sameer could you help with this question?

[vktewari]

Economics is so much of calculus with a very large no. of variable's, often interconnected.

[tusharkulkarni]

Extremely loaded conversation. Towards end, i guess each statement/sentance is worth one lecture to understand. Very tired 😂

[hardipgoindi]

Ultimately one has to see, whether there is DEMAND of credit is growing and bankers refusing the loans. Thats the crux

[harpindersingh]

So, Double dilemma for RBI. They need to reduce repp so more liquidity means higher inflation, which is already high.

[ajendrapandey]

How does withdrawal of dollar lead to shortage of rupee in the system? I didn't get that part.