Viral Video: Liquidity crunch? Employees of a Major Bank Spotted Selling 'Schemes' on Streets, Is Everything Fine With Our Banks?

Viral Video: To attract cash deposits to fuel the strongest credit growth in a decade, Indian bankers have started to go on to the streets with megaphones and persuading grocers to sign up clients.

According to data released by the Reserve Bank of India, rising loan demand from businesses and consumers has driven annual credit growth to a decade-high of 17.95% as of October, compared to a five-year average of 9.7%.

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The deposit collection, however, has fallen behind and is still near to its five-year average of 9.4%, which is forcing lenders to look for strategies to entice deposits.

Inflation soaring at an all-time high

Due to the possibility of higher returns than bank deposits, equity and debt funds must compete with lenders for liquidity. Real returns on bank deposits, which in most cases are roughly 6% annual interest rate for two years, remain negative as inflation has risen to a five-month high of 7.4%, according to the government.

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Krishnan Sitaraman, deputy chief ratings officer at CRISIL Ltd., the Indian unit of S&P Global Ratings said that "Banks are funding most of the loan growth through liquidity built up through deposits coming off the coronavirus when credit dipped, They need to shore up deposits now."

Canara Bank employee selling schemes on streets

On Twitter, a video of a Canara Bank employee using a megaphone to promote its deposit plans on streets outside of Mumbai has gone viral. The bank's spokeswoman declined to comment on how many of its employees use this method of money collection. Watch Video:

Axis Bank Ltd., which saw its loan growth drive a 70% increase in net income in the September quarter over the same period the previous year, is partnering with mom-and-pop shops to attract new clients.

As a further measure to attract clients, lenders are increasing deposit rates. The State Bank of India raised the interest rates on some deposit plans by as much as 60 basis points over the last 30 days.

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