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Banks chase deposits with campaigns
January 10, 2023
Waning depositor curiosity and hovering credit score demand are forcing banks to go all-out to draw deposits, despite the fact that they’re pressured to shell out extra in curiosity.
State-owned Indian Bank on 6 January held an early-morning marketing campaign at Mumbai’s Marine Drive, the place about 200 workers walked the promenade holding placards of assorted deposit schemes. A financial institution worker mentioned Indian Bank was capable of open six to seven new financial savings accounts in the course of the marketing campaign.
“We received fairly a great response, actually it was higher than we had anticipated,” the employee said.
Faced with waning depositor interest, banks have been forced to start raising interest rates on deposits. The post-covid withdrawal of liquidity has also aided the transmission, with credit growth significantly outpacing deposits growth.
Weighted average deposit rates have increased by 55 basis points (bps) between May when RBI started raising the repo rate and November, showed RBI data. The central bank has raised the repo rate by 225 bps so far in this cycle.
Experts said while deposits are coming back into the system a large chunk is going to the bigger banks, leaving small lenders fighting for the rest. India’s largest private sector lender HDFC Bank witnessed a 19.9% year-on-year (y-o-y ) growth in deposits in the December quarter, while smaller rival Karnataka Bank reported 7.9% deposit growth during the period.
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