Large private lenders see their coffers swell
A wider network, a better position of capital and a better perception of the market contribute to private sector banks are expanding their deposit base much faster than their smaller peers, especially period private banks, data from Capitaline showed.
Events at some banks and non-banks over the past year that have attracted regulatory intervention could have led to greater confidence in the big banks.
For example, deposits at HDFC Bank and ICICI Bank, as of September 30, were 20% higher than a year ago, although both banks already have large deposits.
In absolute terms, HDFC Bank recorded growth of ₹2.07 trillion, while the deposits of its rival ICICI Bank increased ₹1.36 trillion in the 12 months ending September 2020, data from Capitaline showed.
Other private lenders like Axis Bank and Kotak Mahindra Bank have also seen their deposits increase by ₹51,496 crore and ₹28,493 crore, respectively, as of Sept. 30 from a year earlier, according to data.
However, the picture is quite different for some former smaller private banks like South Indian Bank, Karur Vysya Bank and former Lakshmi Vilas Bank, all three registering a decline in total deposits.
Deposits with City Union Bank and RBL Bank increased a little above 2% during the same period.
“I would tend to believe that the skepticism is more about the old private sector versus the new private sector banks for clients. But it’s certainly not because customers are looking for the interest rates, because the big banks tend to offer lower deposit rates, ”a senior economist said, adding that the increase in insurance- deposits at ₹5 lakh should have eased the nerves of the customers.
A former banker at a former private lender had told the Mint earlier that some of the vintage lenders had strong political ties, with corporate governance taking a back seat in many cases.
A recent example of a former private bank in need of regulatory intervention is the capital-strapped Lakshmi Vilas Bank (LVB), which merged with the local Singapore-based subsidiary of DBS Bank.
Problems were brewing even at Dhanlaxmi Bank a few months ago, when shareholders rejected the appointment of a CEO chosen by the Reserve Bank of India.
This comes at a time when banks are inundated with a tide of liquidity, with deposits still rising.
As of September 25, bank deposits rose 10.51%, against a 5.14% increase in bank lending, underlining the reluctance of lenders to lend as well as the lack of demand for credit.
Since then, deposit growth has increased to 10.89% and credit has improved slightly to 5.82%, as on November 20.
“The excess liquidity can be attributed to deposit growth persistently outpacing credit growth,” Care Ratings said in a Dec. 5 report.
With reduced cash flow and an uncertain recovery from the covid-19 pandemic, customers are saving more than ever before.
Financial savings of Indian households soared to 21.4% of gross domestic product (GDP) in the June quarter, from 7.9% the previous year, according to data released by the Reserve’s November bulletin. Bank of India.
Households’ propensity to save may have increased significantly during the pandemic in two ways, according to the central bank.
On the one hand, households would have been forced to save more, not being able to consume at their normal level, and on the other hand, they could have increased their precautionary savings because of the uncertainty about their future income.