In the last couple of years, credit growth has grown at a much faster clip than deposit growth, and there have been concerns raised about it. The Reserve Bank has also in the past voiced its concerns over the exuberance in unsecured retail loans. Recently, Finance Minister Nirmala Sitharaman urged banks to think of innovative deposit schemes to shore up deposits. But while deposit growth may have lagged credit growth, it doesn't necessarily mean that bank deposits are decelerating. In fact, its far from it, as data from the country's largest lender shows.
According to the research department of State Bank of India, in 2022-23 scheduled commercial banks registered the highest amount of absolute growth in deposits and credit since 1951-52 and that story continued in 2023-24 as well. Its data shows, in the financial year 2023, deposits grew by Rs 15.7 lakh crore and credit by Rs 17.8 lakh crore. In FY 2024, deposits grew by Rs 24.3 lakh crore and credit by Rs 27.5 lakh crore.
"The myth of a flagging deposit growth appears as just a statistical myth with credit growth outpacing deposit growth being tomtommed as a deceleration in deposit growth," according to the report authored by Soumya Kanti Ghosh, group chief economic adviser, SBI.
The report noted that incremental deposit growth at Rs 61 lakh crore, outpaced incremental credit growth at Rs 59 lakh crore since financial year 2022.
From a longer term perspective, between financial year 2014 till July 2024, deposits at scheduled commercial banks grew by Rs 144 lakh crore, while credit grew by Rs 116 lakh crore, its data showed.
According to SBI, an emerging trend has been that CASA (current account and savings account) deposits have declined from 43.5 per cent in the year ended March 2023, to 41 per cent in the year ended March 2024. At the same time, share of term deposits in total deposits has risen from 56.5 per cent to 59 per cent.
Post-pandemic, as RBI raised its benchmark repo rate to tame high inflation, deposit as well as lending rates have gone up. With term deposits offering better interest rates, many people would have parked their money there.
"On an incremental basis, term deposits accounted for nearly 78 per cent of the total deposits in FY 2024 and the share of CASA deposits has declined. This is obvious as in an increasing interest rate scenario, CASA moves to time deposits," said Ghosh.
The report also notes that while the share of urban and rural deposits has remained flat at around 10 per cent and 21 per cent respectively over FY2014 to FY2024, the share of semi-urban population in total deposits has increased, SBI noted. On the other hand, the share of metros in deposits has declined from 54.2 per cent in FY2014 to 50.9 per cent in FY2020, before inching up a bit to 52.8 per cent last financial year.
The average ticket size of savings bank/ term deposits of state-owned banks was Rs 72,577, compared with Rs 1.60 lakh for private sector lenders and Rs 10.5 lakh for foreign banks, the SBI report stated. Notably, 55 per cent of the Rs 24 lakh crore in deposits garnered by scheduled commercial banks last year, came from households, it said.
In the last few years, double-digit returns have attracted lot of new investors to capital markets. Mutual Fund investor folios have grown from 3.95 crore in March 2014 to Rs 19.10 crore in June 2024, which is a near 5 times jump. Median age of all investors in capital markets is now 32 per cent, with 40 per cent of investors being less than 30 years, the report noted. In comparison, 47 per cent of term deposits are now held by senior citizens.
The increased investment in mutual funds, equity and other alternate investment avenues is leading to asset-liability management risk to the banking sector, according to SBI's research.
The report says tax reforms in deposits can accentuate banking system's stability.
"In line with MF/ equity markets, we are of the considered opinion that government should tweak the tax on interest on deposits and delinking tax treatment at the highest income bucket... and tax treatment at redemption and not at accrual," said Ghosh.
The report also calls for product innovations to make vanilla deposits more attractive. There could possibly be age or geography-based differentiation, interest rates could also be fixed or floating, there could be gold deposits etc. With rising share of women deposits, women centric products could also be explored, it felt.