Veteran Indian Banker Says New Tools Needed as Deposits Fizzle

India's banking sector is confronting a structural headwind that extends far beyond routine cyclical pressures: depositors are increasingly abandoning traditional savings accounts in favor of equity investments and alternative asset classes. This shift, acknowledged by senior banking figures including veteran executives at major Indian lenders, represents a fundamental challenge to the deposit-dependent funding model that has underpinned South Asian banking for decades. The phenomenon reflects a confluence of factors reshaping Indian financial behavior. Retail investors, buoyed by a booming stock market and growing financial literacy, have discovered that equity returns substantially outpace deposit interest rates—even when those rates have risen modestly in recent quarters. Simultaneously, the proliferation of digital investment platforms has democratized access to capital markets, removing traditional friction points that once kept unsophisticated savers confined to bank deposits. For Indian lenders, this represents an existential challenge. Banks have historically relied on stable, low-cost deposit bases to fund lending operations. As these deposits migrate toward equity markets, lenders face a dual squeeze: rising funding costs and reduced lending capacity. Major Indian banks have begun experimenting with alternative funding mechanisms—including securitization, wholesale borrowing, and offshore funding—but these remain insufficient to offset the structural shift in depositor preferences. The implications for