Bank deposits reduce by 50%
By Neelima Shankar
Oct 20, 2009
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The latest Reserve Bank data indicated that the deposits for the quarter ended September decreased by 50 percent quarter-on -quarter. The deposits in the second quarter stood at Rs. 88,604 crore as against Rs. 168,000 crore the preceding quarter.

This, being the second lowest growth in second-quarter in the last five years, can be attributed to the banks unwillingness to take expensive bulk deposits as they are trying to balance the deposit growth and credit demand ratio. According to a senior official at a public sector bank another reason could be that, corporate, which had spare funds last year lying in the banks are now taking it out with investments slowly picking up again.

Mr. M Narendra, executive director of Bank of India feels that many banks are not aggressive in raising deposits as they want to keep in pace with the credit demand. He further adds that most banks have stopped promoting bulk deposits as they were during the period of liquidity crunch last year.

It may be noted that during the second quarter the sum total of the bank loans at Rs. 1,08,864 crore is more than the total deposits. Rates on fixed deposits have been reduced by almost all banks. The current rates are in the range of 6.5% to 7.5% for periods ranging from one to five years.

Amidst the global crisis, deposit rates touched around 8 percent in March 2008. Banks had pushed up rates to mop up resources but as the economy started recovering, the banks started getting excessive deposits and therefore slashed the deposit rates.


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