Around seventeen public sector banks may take a hit on profitability because of the bulk deposits they hold.
The banks' high cost deposit and certificate of deposits (CDs) have excided the target of 15 per cent of the total deposits set by the Government. The banks have overshot the target, despite of Finance Ministry Directive of September 2012 asking the banks to lower such deposits.
According to data collected by the Finance Ministry for the three quarters which ending on December 31, 2012, only seven out of 20 public sector banks had high-cost deposits and CDs below the target of 15 per cent.
Similarly, among State Bank of India and its five associates, two were below the target. In 17 banks bulk deposits and CDs formed 15.31-36.10 per cent of total deposits, even after recording a significant reduction from the March 2012 level.
The average bulk deposit of IDBI Bank was 8.49 per cent, Punjab and Sind Bank 8.31 per cent, Corporation Bank8.15 per cent and Vijaya Bank 8.09 per cent - all higher than other banks. Banks are supposed to bring down bulk deposits and CDs to the targeted level by March 31, 2013.