👍Banks go all out to raise deposits | The Financial Express

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Various banks are also tweaking the branch expansion strategy, so that the deposit-sourcing potential of a particular geographic region is taken into account. Bankers are specifically targeting non-resident Indian and senior citizens to garner more deposits.

Bank loans rose 16.3% year-on-year for the fortnight ended January 27 while deposits grew a mere 11% YoY. (File)

With the deposit growth lagging the growth in credit for quite some time now, banks are taking a multi-dimensional approach to source deposits in order to cater to the strong demand for loans. In addition to hiking the interest rate on deposits, lenders will look to reach out to new customers through partnerships, and enhance their digital channels, say experts.

“Banks raise deposits according to the specific requirements and credit growth strategy, which may vary for each bank. The focus could be more on strengthening their relationships with retail government departments, trusts, associations, societies, clubs, and non-resident Indians’ trusts for raising deposits and current account savings account (CASA). Digital channels will definitely be the key enabler for sourcing new clients,” Murali Ramakrishnan, managing director and chief executive officer, South Indian Bank, said.

Bank loans rose 16.3% year-on-year for the fortnight ended January 27 while deposits grew a mere 11% YoY.

In the press conference after the Reserve Bank of India’s latest monetary policy statement, deputy governor Michael Patra put the onus on banks to mobilise deposits and bridge the gap between credit and deposit. “The difference (between credit and deposit) has narrowed, but there is still a difference. It is really up to the banks to mobilise deposits and make up the gap. We are doing so through certificate of deposits and reducing their non-statutory liquidity ratio investments. But, they need to mobilise deposits on their own to meet the gap,” Patra said.  

In recent months, banks have been aggressive in hiking the rate on fixed deposits, with the RBI looking to remove excess liquidity from the financial system.

However, the quantum of the hike is still far less than the 250-bps rise in the repo rate in the current rate-hike cycle. This gap suggests that there is room for a further hike in deposit rates. In this regard, it is easier for banks to hike the interest rate on term deposits than on savings deposits, say experts.

“IDBI Bank has been measuring and re-calibrating its rate of interest on term deposits appropriately on a periodic basis, based on external triggers such as changes in benchmark rates and various internal factors such as its liquidity position and credit offtake,” Suresh Khatanhar, deputy managing director, IDBI Bank, said. “The bank has introduced special buckets in retail term and wholesale deposits. It will continue to re-calibrate its rate of interest on the basis of prevailing market conditions.”

Various banks are also tweaking the branch expansion strategy, so that the deposit-sourcing potential of a particular geographic region is taken into account. Bankers are specifically targeting non-resident Indian and senior citizens to garner more deposits.

“We are looking at branch growth. This time, we are looking at branches with good deposit potential. In the past, we have had a composite model, but now we are breaking away from that and looking at specific purpose-built locations. Some locations may be good for deposits, some may not be good for lending. Many of the branches may still be composite, but we will have a separation based on location and potential,” says Ittira Davis, managing director and chief executive officer, Ujjivan Small Finance Bank.

“Today, the banking system is more attractive from a depositor’s point of view because of higher interest rates. Some banks have even hiked their savings account rates in order to reduce the differential between term deposits and savings accounts. If you look at the overall scenario, it is more attractive for depositors now than it was a year ago,” Davis said.