Why India’s deposit crunch has a taste of China’s past

India is emulating China’s post-2001 tight money policy. But illiquid banks are a hurdle to credit-fueled growth

A shortage of deposits is starting to unnerve India’s bankers and policymakers. The lenders’ worry is more understandable than the authorities’.
Taking a leaf from a two-decade-old Chinese playbook, the central bank is reining in money growth to tame inflation. In the process, though, it’s putting up a new hurdle in the way of credit and investment. Separately, the government is making the deposit crunch worse by taxing savers aggressively, but keeping the proceeds away from the financial system. Bankers are compounding the problem by not paying enough to savers.

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