Bankers Observe Slowdown in Retail Deposits

May 22, 2009	(Be the first to rate this story!)  Loading ...
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Bankers believe that the sudden spurt in the stock market and the softening of deposits rates might encourage retail investors to look at alternatives to bank deposits for parking surplus funds. Though investors locked into long-term fixed deposits may not pull out, banks might still witness a slight slowdown in fresh deposits, according to top public sector bank executives. “This shift from bank deposits to alternative sources of investment such as the stock market might not be sudden as people who have already burnt their fingers might wait and watch for a while,” said Mr T. M. Bhasin, Executive Director, United Bank of India.

Banks witnessed a huge growth in deposits beginning September 2008 due to a weak stock market and the downturn in the economy. Mr O. P. Bhatt, Chairman, State Bank of India, however felt that the growth in deposits might not sustain with the stock market on a rebound. SBI’s deposits grew 38 per cent by Rs 2,04,669 crore in 2008-09 on a year-on-year basis. The bank had deposits flow of about Rs 1,000 crore daily in November-December 2008 and received Rs 20,000 crore worth of deposits in April 2009, Mr Bhatt said. “This momentum might not sustain,” he said, responding to a query by Business Line recently. “There has been an unprecedented flow of deposits, but we feel it should go down now as the stock markets seem to be on the rebound. Earlier there was money flowing from multiple sources such as stock markets and real estate into bank deposits but this momentum might not continue,” Mr Bhatt said.

Banks lowering of interest rates on deposits over the last few months following surplus liquidity might also prompt this shift. SBI has been bringing down the interest rates on deposits in a calibrated manner by about 200 basis points, the Chairman pointed out. The shift out of bank deposits might also be prompted by the pick up in the economy. Talking about the country’s growth story, Mr Bhatt said: “The worst is over for the economy; cement prices are picking up, telecom sector has been growing at a very rapid pace and the banking sector is growing at 20 per cent. So things should start picking up. Though we might not be able to clock a GDP growth rate of 9 per cent immediately, even a 6.5-7 per cent growth is good.”

The first and second quarters of a financial year are usually slow in terms of credit offtake and deposit mobilisation. So, the slowdown, if any, might also be attributed to this, bankers observed. Banks have, in fact, been grappling with surplus funds. “We have enough liquidity and we are looking at ways and means of deploying it so as to ensure that the funds are not kept idle,” Mr Bhasin said. Mr S. K. Goel, Chairman and Managing Director, UCO Bank, said the lower volumes and lower yields on deposits would help improve bank margins.

News Published Under:   Retail Market in India |

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