The collapse of the US giant Lehman Brothers led to an increase in the market share of the deposits of India's largest lender, State Bank of India (SBI). The quarter following the bankruptcy of Lehman, SBI recorded a substantial hike in its bank deposits and captured the market share of other public as well as private banks.
As per the RBI data, SBI share of bank deposits increased from 23.2% to 24.4% during the third quarter of the fiscal 09. The bank recorded an overall deposit base of Rs 35,69,352 crore at the end of December 2008.
The main reason for a rise in the market share of SBI was that it was considered to be at the top in the ‘flight to safety' phenomenon after the fall of Lehman Brothers. There were reports that banks are facing difficulties and hence the investors transferred their funds away from private and foreign banks to PSU banks. Amongst the PSU banks, SBI has a lead as it was providing the highest returns through its fixed deposit scheme of 1,000 days. Investors could earn a high interest on this special scheme launched by the bank as compared to the term deposits of other PSU banks.
In fact, large corporate firms such as Infosys also shifted their funds to SBI away from ICICI Bank. The companies said that it transferred around Rs 1,000 crore to SBI after the crisis hit the globe.
Following the downturn when SBI witnessed a rise in its deposits, all other banks reported a fall in their share of bank deposits. RBI data reveals that the share of nationalized banks in the bank deposits during the period between October 2008 and December 2008 fell from 48.6% to 48.3%. Private and foreign banks reported a decline from 19.4% to 18.6% and 5.8% to 5.7% respectively during the same period. However the rural banks clocked a marginal rise from 2.3% to 2.9% in their share.
Meanwhile on the bank credit front, nationalized banks were the most aggressive lenders with the share rising from 47.9% to 49% during the third quarter of the last fiscal. Nevertheless SBI's share of bank credit remained same at 23.4%. On the other hand, bank credit for private and foreign banks dipped during the period as they had been reluctant on their lending. Bank loans for private banks fell from 19.4% to 18.7% while the share of foreign banks declined from 7.2% to 6.6%.
At the same time, corporates also depended on PSU banks to avail loans during the quarter following the crisis. This was the time when funds from international markets as well equity markets almost disappeared and therefore everybody resorted on government banks that were also considered safe.