MUMBAI: Bank deposits have grown by nearly Rs 12.2 lakh crore to Rs 186.2 lakh crore in the current financial year (till January 13). The fresh addition has nearly entirely come from fixed deposits (over Rs 12.1 lakh crore). Low-cost demand deposits, which comprise balances in current and savings accounts, have grown by just Rs 2,869 crore in FY23 so far.
Data released by the RBI shows that time deposits (includes FDs) with banks stood at Rs 164 lakh crore as of January 13, 2023. This is an increase of 8% over Rs 151.9 lakh crore as on March 31, 2022. Demand deposits as of January 13 stood at Rs 22.1 lakh crore – almost unchanged since the end of the previous financial year.
Banks this year have enjoyed record high interest margin, which is the spread between the average cost of deposits and yield on loans. Banks have passed on the 225-basis-point (100bps = 1 percentage point) increase in the policy rate to borrowers as most loans are now linked to the repo rate. They have managed to keep cost of deposits under control by using surplus liquidity that they had on their balance sheet due to deposit growth outpacing that of loan last year. The surplus funds were parked in government bonds, which banks are now liquidating.
While higher share of FDs eat into banks’ margins, credit growth helps them make up for the higher cost. Despite the increase in interest rates, bank credit to commercial sector has grown by Rs 18.9 lakh (15.6%) crore in the current financial year to Rs 126 lakh crore.
As the tide turns, banks are campaigning for deposits, offering special schemes with rates as high as 8% for senior citizens. The second half of FY23 has seen a concerted move by bank account holders to shift money lying in savings accounts to FDs. Two days after the RBI hiked its repo rate for the first time amid the pandemic on May 4, 2022, banks had Rs 154.7 lakh crore of term deposits. This figure has jumped to Rs 164 lakh crore as of January 13, 2023.
Data released by the RBI shows that time deposits (includes FDs) with banks stood at Rs 164 lakh crore as of January 13, 2023. This is an increase of 8% over Rs 151.9 lakh crore as on March 31, 2022. Demand deposits as of January 13 stood at Rs 22.1 lakh crore – almost unchanged since the end of the previous financial year.
Banks this year have enjoyed record high interest margin, which is the spread between the average cost of deposits and yield on loans. Banks have passed on the 225-basis-point (100bps = 1 percentage point) increase in the policy rate to borrowers as most loans are now linked to the repo rate. They have managed to keep cost of deposits under control by using surplus liquidity that they had on their balance sheet due to deposit growth outpacing that of loan last year. The surplus funds were parked in government bonds, which banks are now liquidating.
While higher share of FDs eat into banks’ margins, credit growth helps them make up for the higher cost. Despite the increase in interest rates, bank credit to commercial sector has grown by Rs 18.9 lakh (15.6%) crore in the current financial year to Rs 126 lakh crore.
As the tide turns, banks are campaigning for deposits, offering special schemes with rates as high as 8% for senior citizens. The second half of FY23 has seen a concerted move by bank account holders to shift money lying in savings accounts to FDs. Two days after the RBI hiked its repo rate for the first time amid the pandemic on May 4, 2022, banks had Rs 154.7 lakh crore of term deposits. This figure has jumped to Rs 164 lakh crore as of January 13, 2023.
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