the fact that the higher reliance on short term liabilities can have its own repercussions if market conditions deteriorate. 13. banks adopt distinct liability sourcing strategies based on their competitive strengths, market positioning, and business priorities. large banks with an extensive branch network may have access to low - cost, stable retail deposits. while the banks with a more pronounced urban presence may target affluent customer segments, offering high - value deposit products tailored to high - net - worth individuals ( hnis ) and corporate clients. additionally, some banks with advanced technology stacks leverage digital platforms to enhance customer acquisition and streamline liability sourcing, providing a competitive edge in attracting both retail and corporate deposits. on the other hand, differentiated banks are seen to have a higher reliance on inter - bank deposits and wholesale funding. this diversity in funding profiles presents unique challenges in alm, as each business strategy introduces its own complexities in managing liquidity, cost of funds, and risk alignment. 14. ‘ institutionalisation ’ of deposits, which i referred to earlier, will bring along specific challenges for the alm for banks. a reduced reliance on retail deposits, coupled with a greater share of funding from institutional sources will likely result in increased funding costs, which in turn negatively affects profitability. the quest to maintain the margins can lead to eventual transmission of increased funding cost to interest rate on loans. this would either constrain growth of loan book or may force the lenders to dilute the underwriting standards and lend to riskier borrowers to maintain earnings ratios. banks must stay alert to the risks of certain practices that may seem less evident during strong economic growth but could lead to serious consequences during economic downturns. banks heavily reliant on wholesale funding are more vulnerable to rollover risks and outflows in times of economic stress. therefore, effective liability management is crucial for mitigating these risks. 15. another issue pertains to deposit growth of certain banks not keeping pace with their loan growth, which has raised regulatory concerns about the risks associated term deposits formed 82 per cent of incremental deposits mobilised in h1 : 2024 - 25. source : rbi financial stability report december 2024. average cds outstanding in fy 2023 - 24 was ₹4. 18 lakh crore. source : rbi database on indian economy ( dbie ), rbi staff calculations page 7 of 9 with higher dependency on wholesale funding for credit disbursement. such imbalances are viewed

2009 ). scheduled commercial banks ( scbs ) ( excluding small finance banks, payments banks and regional rural banks ) have been permitted to set board approved limits for borrowing in call and notice money markets, within the prudential limits for ibl. such liability - the other main driver of profits is the provision requirement which is dependent on the asset quality. page 3 of 9 based concentration limits are unique to india and reflect the reserve bank ’ s early cognizance of these risks. liability structure and growth 7. deposits continue to be the primary source of funds for scbs, amounting to ₹217 lakh crore, which represented 77 per cent of total liabilities at the end of fy 2024. in contrast, capital funds ( i. e., capital, reserves & surplus ) and borrowings, each constituted around 9 per cent of liabilities 3. the comparison of data between fy 2016 to fy 2024 indicates that the deposits have grown at an annual rate 4 of around 10 per cent, aligning with the overall balance sheet growth, and their contribution to total liabilities has remained stable at around 77 per cent ( charts 1 and 2 5 ). meanwhile, borrowings have grown at a slower rate3 of 7 per cent as a result of which its share in total liabilities has decline from 11 per cent to 9 percent. on the other hand, capital funds have grown at close to 13 per cent and its share has increased progressively from 7. 6 per cent to 9. 3 per cent, indicating the deleveraging of banks ’ balance sheets, boosted by higher profitability and capital raising efforts. 9 % 4 % 9 % 78 % capital funds deposits borrowings others chart 2 : composition of liabilities of scbs - fy 2016 to fy 2024 share of total liabilities ( per cent ) chart 1 : composition of liabilities of scbs - end march 2024 financial year capital funds deposits borrowings others 8. maturity wise, during the same period, the contribution of term deposits has declined from 65. 8 per cent of total deposits to 60. 9 per while the shares of savings and current account deposits have increased from 25. 3 per cent and 8. 9 per cent to 29. 2 per cent and 9. 9 per cent, respectively. consequently, casa ratio has improved from 34. 2 per cent to 39. 1 per cent. this trend may have contributed to the borrowings include inter alia borrowings from rbi