Small towns lead in old note deposits to banks

Kolkata-based UCO Bank received Rs 2,500 crore as cash deposits. Of this, Rs 1,300 crore came from rural and semi-urban areas

Household bank deposits from small towns and rural pockets exceeded expectations, even as banks struggled to replenish branches and ATMs (automated teller machine) with cash. 

On Thursday alone, Kolkata-based UCO Bank received Rs 2,500 crore as cash deposits. Of this, Rs 1,300 crore, or more than half, came from rural and semi-urban areas, according to Ravi Krishan Takkar, managing director and chief executive, UCO Bank. 

At another Kolkata-based lender, United Bank of India, total cash collection on Thursday was close to Rs 1,700 crore. Rural deposits, close to 

Rs 1 crore per branch, were on a par with urban ones. 

 

“On average, we received Rs 1 crore in each branch, and in one or two rural branches, deposits even touched Rs 5 crore. Now lifting this much turned out a problem due to lack of manpower,’’ said an official on the condition of anonymity. 

“The urban and rural collections were mostly spread out. There was a lot of collection from rural branches,” said Takkar.  This apart, huge deposits are likely to affect the loan to deposit ratio of banks. 

“Clearly, the collections have exceeded expectations. We can deploy this cash in a variety of ways. We will see some fall in loan to deposit ratio,” said Pawan Kumar Bajaj, chief executive officer and managing director, United Bank of India. 

Notably, in Assam’s Dibrugarh district alone, total collections in 57 branches of a public sector bank on Thursday were close to Rs 50 crore, much more than expected. Most of the deposits were household savings; not many institutions showed up to deposit cash, said a banker.

“If banks are not able to lift cash quickly, it is going to be a losing proposition for banks,”’ said an official at a public sector bank. 

While banks are awash with cash, ATMs ran dry and some bank branches had to be shut temporarily. The problem was more acute in northeast.

“In northeast and north Bengal, there had been some problems in cash replenishment. Hence, cash had to be sent by air to speed up the process,” said Bajaj.
 

Also, with ATMs requiring to be reconfigured to dispense new Rs 2,000 currency, several remained shut. 

According to Bajaj, nearly 50% of ATMs at United Bank of India could be reconfigured by the end of the day. 

“There is a lot of pressure on ATMs, and they are running out of cash very fast. We have sent a representation to the central bank for faster replenishment,” said Takkar.

On a positive note, banks expect the number of zero-balance accounts opened under Pradhan Mantri Jan-Dhan Yojana to come down drastically, with the flow of deposits in the form of household savings in rural areas. As on November 2, percentage of zero-balance accounts opened under the scheme was close to 23%, while the total deposits stood at Rs 45,302 crore.