Rising interest rates, revival in investment plans may reverse the trend.
Abundant liquidity in the system along with excess cash with companies and individuals have resulted in a build-up in current account and savings account (Casa) balances.
But, bankers expect some pressure on the proportion of low-cost deposits to total deposits in the coming months, as companies start investing for capacity additions and the liquidity situation tightens.
With deposit rates going up, bankers also expect individuals to shift funds from Casa to term deposits. Also, if the Reserve Bank of India tightens liquidity aggressively, the demand for bulk deposits will be back.
The impact of falling deposit rates is visible in the overall numbers. The latest RBI numbers show that demand deposits, which are deposits with a term of less than a year, saw a 22.88 per cent increase during the last financial year. In contrast, time deposits, which have maturity of over one year, rose 16.23 per cent.
“While we will try to ensure that Casa stays around these levels, it is a tough task once investment picks up. But a larger branch network should help,” said an executive with a private bank.
Apart from companies, even individuals maintained higher cash balances, as there was uncertainty. What also helped matters was an increase in cash flows for sectors such as gems and jewellery and real estate.
Cash flows for these sectors were severely affected after the credit crisis intensified in September 2008. This affected the current account balances of many banks. From the second quarter of the last financial year, cash flows for these sectors revived.
Besides, banks also resorted to increasing the minimum balance required for savings bank accounts.
As a result of these multiple factors at work during the last financial year, players such as HDFC Bank saw the share of Casa touch the 50 per cent mark. The biggest gainer was ICICI Bank, which shed high-cost bulk deposits in favour of Casa balances during a period when it shrank its loan book. What also helped was an expansion of the branch network which helped it mop up over Rs 12,000 crore in savings account balances.
“We have focused on the capital market-related activities and commercial banking through the year. Those are the factors which have led to the increase in the current account level,” Rakesh Jha, deputy chief financial officer, ICICI Bank, told analysts last week.
HDFC Bank Executive Director Paresh Sukhtankar said that last year, the bank did not push term deposits due to sufficient liquidity. This year, however, the bank is looking to push Casa as well as term deposits.
Exceptions to the trend were Canara Bank, Dena and Corporation Bank, which have seen a decline in the share of Casa in total deposits (see table).
For other public sector banks, which have traditionally focused on Casa and other retail deposits, the increase in the share of Casa has been comparatively lower. “The smaller increase is because of the high base. Unlike the private players, the level of deposits with us is much higher. Besides, private players such as HDFC Bank are settlement banks for stock and commodity exchanges which also help them show a higher Casa percentage,” said a public sector bank executive.
Corporation Bank Chairman and Managing Director JM Garg said had it not been for a software glitch, the numbers would have been better.
