Banks go all out to raise deposits

With the deposit growth lagging the growth in credit for quite some time now, banks are taking a multi-dimensional approach to source deposits in order to cater to the strong demand for loans. In addition to hiking the interest rate on deposits, lenders will look to reach out to new customers through partnerships, and enhance their digital channels, say experts.

“Banks raise deposits according to the specific requirements and credit growth strategy, which may vary for each bank. The focus could be more on strengthening their relationships with retail government departments, trusts, associations, societies, clubs, and non-resident Indians’ trusts for raising deposits and current account savings account (CASA). Digital channels will definitely be the key enabler for sourcing new clients,” Murali Ramakrishnan, managing director and chief executive officer, South Indian Bank, said.

Bank loans rose 16.3% year-on-year for the fortnight ended January 27 while deposits grew a mere 11% YoY.

In the press conference after the Reserve Bank of India’s latest monetary policy statement, deputy governor Michael Patra put the onus on banks to mobilise deposits and bridge the gap between credit and deposit. “The difference (between credit and deposit) has narrowed, but there is still a difference. It is really up to the banks to mobilise deposits and make up the gap. We are doing so through certificate of deposits and reducing their non-statutory liquidity ratio investments. But, they need to mobilise deposits on their own to meet the gap,” Patra said.