Mumbai: Correction in equity markets over time, could help some deposits return to banks, State Bank of India managing director Ashwini Kumar Tewari said on the sidelines of the Global Fintech Fest (GFF) on Wednesday.
"As the market corrects over time, some of the money which used to be with us, will also come back," Tewari said, adding that the bank is now also focussing on granular, small-ticket deposits to aid deposit growth.
“There is this entire base of the pyramid segment, where possibly apart from Jan Dhan (Yojana) we haven’t really focussed on. That is something we are focussing on to say even those small value deposits, can we get some of those,” said Tewari.
This is in-line with the finance minister’s recent comments wherein she urged banks to go out into the market and not rely only on digitally accrued deposits. “We have to go out and seek which we are doing. We have now outbound teams for liabilities like we had earlier for assets,” he said.
On their part, banks too are raising deposit rates where possible and depending on the segment they want to catch. They are also focussing on innovation and targetting segments such as trusts, societies and hospitals, among others, to garner deposits. Even so, deposit growth continues to lag credit growth and banks are trying to address this credit gap by raising funds through avenues such as infrastructure and additional tier-I (AT-1) bonds, which is already helping improve banks' CD (credit-deposit) ratio.
On year, credit growth was up 13.5% as of 9 August whereas deposit growth was up 10.9%, as per Reserve Bank of India data.
"The CD ratio has been generally hovering around 80% since September 2023. The CD ratio saw a decline of 19 bps (basis points), compared to the previous fortnight, and stood at 79.1% for the fortnight (26 July 2024), compared to 77.3% on 11 August 2023," CareEdge said in a note on Wednesday.
“Banks are fully mindful of the (deposit crunch) issue. l think they are taking necessary actions. We should allow them some time to see the results,” RBI Governor Shaktikanta Das said on the sidelines of another panel. Das had earlier said that the highest credit-deposit ratio in the banking system in at least 20 years, could “potentially expose the system to structural liquidity issues”.
SBI's gross advances grew 15.4% year-on-year as of 30 June, whereas deposits were 8.2% higher.
Last month, Tewari at another event, had said that the government needs to explore options such as tax benefits and incentives for investments linked to deposits, to encourage individuals to keep more money in bank deposits.
“If the gap persists, that creates imbalances. That’s what the regulator is pointing out, that imbalances are not good for the industry and banks. Because otherwise some banks are going to bulk deposits, which are inherently unstable as they are a function of interest rates and can go away very quickly. Retail deposits, which are far more stable, is the way to go,” said Tewari on Wednesday.
