This pushed the banks cost of funds Top bank executives said rising interest rates put pressure on their net interest margin. Savings deposit rates at the big five banks ranged from 2.7% to 3%, while their rates on term deposits with a maturity of more than one year remained above 6% to 7.25% per annum.
Term deposits mobilised by the banking sector rose 18.64 per cent to Rs 116 lakh crore at the end of March 2024 from what they were a year ago, according to data published in the Statistical Handbook of Indian Economy, released by the central bank on September 14.
On the contrary, savings deposits At the sectoral level, it increased by 6% to Rs 63 lakh crore during the same period.
In fiscal year 2023, term deposits grew by 13.5% as compared to a 4.9% growth in savings deposits. Before that, in fiscal year 2022, the growth in term deposits was lower (9.16%) than the growth in savings deposits (12.4%).
Overall deposit growth was recorded at 13.5 per cent in the fiscal year ended March over the previous fiscal. It was 9.6 per cent and 8.9 per cent in the previous two fiscals respectively. Senior bank executives said there had been a clear movement from savings deposits to term deposits as savers are trying to maximise their returns in the scenario of rising rates. State Bank of Indiawhich enjoyed a 22.6% market share in deposits at the end of March, witnessed an 11.13% rise in deposits to Rs 49.16 lakh crore.
“Due to the rising interest rate scenario in FY24, term deposits grew at a robust pace of 16.38 per cent to Rs 27.82 lakh crore, while CASA (current and savings account) deposits grew by 4.25 per cent to Rs 19.42 lakh crore.” OSE stated in its latest annual report.
There has also been a flight from bank deposits to alternative savings products such as mutual funds Bankers said they generally generate higher returns. This is believed to be one of the reasons behind slower deposit growth. credit growth Over the past two years, the Reserve Bank of India has repeatedly warned about the gap between deposit growth and credit growth, saying this could lead to a structural crisis. liquidity matters.
Banks are trying to improve customer engagement to attract depositors.
“Business models need to change appropriately to do this. We need to make sure we focus more on wealth management advice and a full relationship with clients, rather than just accepting deposits.” Federal Bank Managing director Shyam Srinivasan told ET in an interview.
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