Business Standard

Current account deposits shrink in Q1

Related News

Banks have been seeing a slide in current account deposits, where businesses park funds but don’t get interest.

The current account deposit base of large banks has narrowed in the first three months of 2012-13 from a quarter ago, as large companies, business houses and small traders continue to use their “idle cash” to meet financing needs and avoid borrowing at a high rate of interest.

ICICI Bank, the largest private sector lender in the country, saw its current account deposits decline by 12 per cent sequentially in April-June period. For HDFC Bank, the quarter-on-quarter dip was 8.2 per cent. witnessed a 14 per cent sequential fall in current account balance.

CURRENT ACCOUNT DEPOSITS
Banks

Share (%)

QoQ Decline (%)
Mar ‘12 Jun ‘12
Public Sector Banks
Punjab National Bank 7.5 6.7 9.7
Bank of Baroda 7.5 6.3 16.0
Union Bank of India 8.6 8.2 9.7
Private Sector Banks
ICICI Bank 13.7 11.5 12.0
HDFC Bank 18.4 16.2 8.2
Axis Bank 18.1 15.3 14.0
Source: Banks

Public sector banks witnessed a similar trend. Punjab National Bank (PNB), the second largest government-owned bank in India, reported 9.7 per cent sequential decline and 2.5 per cent year-on-year fall in its current account balances.

and saw their current account deposit bases shrink quarter-on-quarter by 16 per cent and 9.7 per cent, respectively, in the first three months of this financial year.

“On current account there is a general concern at a system level as some of the banks have seen a significant sequential decline in current account deposits. It is an industry phenomenon given the corporate cash accrual performance. In the current environment, companies are not keen to leave cash without earning any interest,” said chief financial officer of a large private sector bank.

Current accounts are primarily used by business houses and small traders as there are little restrictions on the value and number of transactions in such accounts. For banks, these accounts are one of the most inexpensive source of deposits as they don’t pay interest on current account deposits.

“As lending rates are high, companies are finding it more beneficial to utilise their unused cash balances. This has resulted in a drop in current account balances,” said executive director of a Mumbai-based public sector bank.

The share of current account deposits in total deposits is also falling as savings deposit and term deposit balances continue to expand. “Mobilisation of current account deposits has been challenging as the interest rates offered on fixed deposits are very attractive,” said a top official of another private sector bank.

Read more on:   
|
|
|
|
|

Read More

RBI asks banks to post bulk deposit rates on website

The Reserve Bank of India (RBI) has asked banks to put up bulk deposit rate on their websites, to stop banks from offering exorbitant rates to ...

Advertisements

Quick Links

More news from Finance Rss icon

Japan's Mizuho Bank to open branch in Ahmedabad by mid-2015

It will be the first Japanese bank to come up in Gujarat

IFC lends $50mn to PNB Housing Finance

Helps mobilise additional $50mn from other investors

Bank credit growth falls below 10% after 5 years

Bank credit had last grown at a sub-10% rate in October 2009 (9.01%)

Back to Top