80% of all term deposits are in the Rs 1.5-10 mn range, 60% from metros

Eighty per cent of the overall term deposits are either in Rs Rs 1.5 million to Rs 10 million range, and are primarily mobilised in the one to three-year bucket window, revealed a study by Kotak Institutional Equities. 

At least 50 per cent of the deposits are still in the 7-8 per cent interest rate bucket. This has seen a 10 percentage points increase in the first quarter of fiscal year 24.

"We should see deposit rates peaking over the next two quarters as the re-pricing cycle is still not fully complete," said MB Mahesh, CFA at Kotak. 

The share of individuals in the overall term deposits is marginally lower quarter on quarter at 50 per cent of the overall term deposits.

 

Consumers continue to exhibit a strong preference to place deposits in the one to three-year category. A part of it can probably be explained by the interest rates offered where the interest rate differential is probably pushing back consumers in placing longer-term deposits. Lenders are also a lot more comfortable in this bucket given that the linkages to loan yields are getting broken with the introduction of EBLR-linked loans, said the study. 

"Comparison of current term deposit interest rates and the headline rates offered by banks suggests that we are moving closer to peak deposit rates for the system. It is still not complete and we probably have a couple of quarters before rates have peaked," said Ashlesh Sonje, CFA at Kotak Institutional Equities.

Moreover, 45 per cent of the term deposits from individuals come from metropolitan markets whereas 75 per cent of term deposits from non-individuals comes from metropolitan markets.

At least 60 per cent of the overall term deposits come from metropolitan and 20% from urban markets.

At least 70 per cent of individual deposits are <Rs1.5 mn ticket size while 85 per cent of non-individual deposits is >Rs10 mn ticket size.

The recent RBI update on quarterly deposits on term deposits shows that public banks have 60 per cent share in deposits but have lost 200 bps since the fourth quarter largely to private banks. 

Market share break-up of deposits across banks, March fiscal year-ends, 4QFY23-2QFY24

Private banks have a marginally higher concentration of deposits in metropolitan markets compared to public banks. 

Mutual funds and fixed deposits are the most popular financial investments amongst Indians, according to a survey conducted by BankBazaar. The saving or investment pattern of people suggests that 54 per cent of people prefer to invest money in mutual funds, while 53 per cent prefer Fixed Deposit schemes. It may be noted that 77 per cent of people still prefer to invest money in savings accounts.