Public sector banks (PSBs) are ramping up their accounts in less-explored areas such as healthcare and housing societies.
They are also planning to offer lucrative deals with salary as well as women accounts to increase their deposit growth.
Business Standard spoke to four senior bankers from state-owned banks.
One of them said, “To enhance deposits, we have started exploring sectors like healthcare and housing societies, which were previously unexplored. Many banks, including ours, have introduced fixed deposit (FD) schemes such as the 444-day FD with attractive rates, which are helping us increase deposits,” said the first senior bank official.
Addressing the media after the Reserve Bank of India (RBI) board meeting on Saturday, Finance Minister Nirmala Sitharaman urged banks to develop innovative and attractive schemes to mobilise deposits.
She said that deposits and lending are the two wheels of a cart and that “deposit growth is moving slowly.”
She emphasised that banks need to focus on core banking activities, which include mobilising deposits and lending to those in need of funds.
RBI Governor Shaktikanta Das highlighted at the press briefing that interest rates are deregulated and banks are free to decide on their rates.
“A trend we have observed, especially after Covid, is that many small investors and households have shifted to investments such as systematic investment plan (SIPs) and equities. This shift has moved them away from traditional investment modes such as FDs and recurring deposits (RDs). Inflation is another factor that has reduced people’s savings,” said the second bank official.
According to data shared by rating agency ICRA, PSBs’ deposit growth rates were 8.1 per cent, 9.3 per cent, and 10.1 per cent, respectively, in FY22, FY23, and FY24. These lagged behind credit growth rates — which were 11 per cent, 17.5 per cent, and 14.8 per cent — during these periods.
“The deposit issue is one that all banks in India are grappling with, and there are limited options available. Banks will need to structure products that attract customers, so they choose these options over other investments or initiatives. Currently, the products available are quite basic, offering only standard interest rates,” said a third senior public sector banker.
The RBI Financial Stability Report, released in June 2024, said the sharp rise in household financial savings during the pandemic in 2020-21 was 51.7 per cent of the total household savings. This has been drawn down subsequently, as in many other economies, and shifted towards physical assets.
“Alongside, households are also diversifying their financial savings, allocating more to non-banks and capital markets,” said the RBI report.
However, PSBs’ credit-to-deposit ratio remained comfortable at 74 per cent as of March 2024, said ICRA.
The senior banker further added that banks are considering offering alternative options, such as insurance-linked products, travel benefits, or credit cards with accounts, according to a fourth senior bank official.
Earlier, in an interview with Business Standard, managing director (MD) and chief executive officer (CEO) of Punjab National Bank (PNB), had said, “There is a gap in deposits compared to credit growth. We are not engaging in bulk deposits from the market because they are costly and do not serve our purpose. We are continually adding new customers. Last year, we added 10 million new customers. We plan to open 150 new branches this year. As of June 30, 2024, we have a total of 10,150 domestic branches and two international branches, which are helping our deposits grow.”
“We are also exploring options to structure products to make them more attractive to customers. We are looking into solutions for different segments, such as salaried class, pensioners, and women. But it is too early to specify the exact requirements,” the first banker added.
The annual report of RBI, which was released in May 2024, said that scheduled commercial banks deposit growth remained below that of bank credit during 2023-24. As a result, the incremental credit-deposit ratio rose above 100 per cent during June 2022-May 2023.
Luring in
> PSBs venturing into sectors such as health care, housing societies. Also planning to offer more lucrative deals with salaried accounts, women accounts to enhance deposits
> Finance Minister Nirmala Sitharaman on Saturday had urged banks to develop innovative and attractive schemes to mobilise deposits