Bankers warn of deposit shifts, fraud surge despite ample liquidity

India's top bankers say liquidity is comfortable, but rising fraud risks and shifting deposit patterns could reshape the financial system.

Household deposits have slipped from 64% to 60% in three years, replaced by institutional money. Some worry this could create volatility, but PNB MD Ashok Chandra disagreed, "We are not restricting ourselves to retail. Even today, we have a strong pipeline of infra projects and a healthy sanction book."

A bigger challenge is the surge in "mule accounts"—legitimate, fully KYC-compliant accounts later rented out for scams. IndusInd Bank’s Rajiv Anand warned: "Scamsters are becoming innovative. We've seen salary accounts of reputed companies misused after months of activity. This is a systemic issue, not limited to one bank."

Banks are responding with costly technology upgrades. BoB's Debadatta Chand said, "The entire ecosystem—regulator, banks, and IFSC—is coordinating. Awareness is key." Chandra added, "Yes, the costs are there. But for every suspicious transaction, an alert is generated. Preserving trust requires it."

On policy, most bankers ruled out an October rate cut. "Not this time. Next time, possibly," said Chand. Federal Bank's K.V.S. Manian agreed, "Maybe one more cut in the year, but not just yet."

Margins may see near-term pressure, but lenders expect recovery by December. As Anand put it, "You will see NIMs coming off this quarter, but going up from Q3 as liabilities reprice."

The message from bankers: liquidity is ample, but trust is fragile. As deposits shift and fraud grows, technology and vigilance will decide stability.