The share of low-cost deposits in the banking system, which is already on a downward slope, could decline further to touch levels seen before Covid-19 due to efficient cash management by the government and the corporate sector, State Bank of India Chairman CS Setty said on Wednesday.
Setty was referring to deposits in bank current and savings accounts (Casa), which are usually priced lower than term or fixed deposits.
“I will re-analyze our numbers, which are an indicator of the banking system. Casa’s ratios before COVID-19 were 40%, and they went up to 45% after COVID-19. Obviously, they will go back to 40%. They may go down further if efficient cash management and real-time cash management by the Government of India comes into the picture,” Setty said at an event organised by the Bengal Chamber of Commerce and Industry.
“Companies have adopted efficient cash management and the government has also moved towards efficient cash management. This means that reserve funds will not be available,” he said.
SBI’s Casa (domestic operations) share in total deposits fell to 40.7 per cent at the end of June, compared with 42.88 per cent a year ago.
Most major banks have seen their Casa ratios fall over the past year as customers increasingly turn to fixed deposits, which offer attractive rates.
However, the SBI chairman said the country’s largest bank would be able to maintain the current share of low-cost deposits.
He said SBI will help small businesses keep their funds in the bank by providing them with superior services and innovative products like cash withdrawal.
He also said that it is not that deposits are not growing.
“If we look at the absolute numbers, deposits have grown by 58 percent in five years and credit has grown by 56 percent.”
Referring to the pressure on retail lending, Setty said: “There is a problem with small value loans (between Rs 50,000 and Rs 100,000), but I think it has not reached the proportion where we should be worried about it.”
He said the recent regulatory norms that reduced the frequency of reporting borrowers’ credit information to credit reporting companies (CRCs) to every 15 days from the previous monthly intervals will help improve retail asset quality.
“Now, the RBI has made it mandatory to update the data within 15 days, which means the loan database will be much more robust and will help moderate any gaps,” he said.
He said there was healthy demand for corporate credit, which was also reflected in the first quarter growth figures.
“The good news is that in the corporate sector, there is significant demand for corporate credit. And last quarter we also had almost 15-16 per cent growth in corporate credit. But in the balance sheet or asset mix, there has been a shift from the corporate sector to the retail sector,” he said.
He explained that the expansion of brownfields is carried out by the corporate sector using its own cash, as they have a strong balance sheet.
“Now, the brownfield expansion is being done with their own cash flows because the balance sheet is stronger. As they are using their own cash, this is not reflected in corporate credit,” Setty added.
First published: September 18, 2024 | 18:59 IS
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