Deposit mop-up gathers pace

Deposit mobilisation higher than loan disbursements in fortnight ended Jan 28.

Banks’ efforts to mobilise deposits have paid off. Banks raised Rs 37,730 crore deposits in the fortnight ended January 28, the highest since November. According to the latest data released by the Reserve Bank of India (RBI), deposit growth in the last one year has been close to 16 per cent while credit has grown 23 per cent.

During the fortnight, deposit mobilisation was higher than the loan disbursements of Rs 15,347 crore. (Click here for graph)

With most banks raising deposit rates this month, bankers expect deposit mobilisation to gain further momentum.

“Banks are always looking for more deposits. Every bank has raised deposit rates on hope the growth will pick up. But so far, the demand has not really gone up. We expect deposit growth to rise in the coming weeks,” said Anil Girotra, executive director, Andhra Bank.

In the third quarter review of the monetary policy on January 25, the central bank had raised concerns over the high incremental credit-deposit ratio and asked banks to beef up deposit mobilisation to match the loan offtake.

After the policy, banks increased interest rates on deposits as well as on loans. IDBI Bank, Bank of Baroda, Union Bank have raised deposit rates by 25-150 points since early February. Old generation private sector lender Lakshmi Vilas Bank’s peak rate is 10.10 per cent for deposits with a maturity of one year to less than two years.

The gap in the growth of credit and deposit is more than what the central bank had projected. The growing gap between credit and deposit could lead to an asset-liability mismatch for banks. RBI had projected 20 per cent and 18 per cent growth in credit and deposit, respectively, for the current financial year.

“The gap in credit and deposit growth is becoming uncomfortable. The Reserve Bank of India has clearly explained that it is going to keep a watch on banks where the incremental CD ratio is over 100 per cent. Such banks may have to slow credit disbursements. Our CD ratio is about 70 per cent, which is below the industry average of 75 per cent. Our incremental CD ratio is also below 100 per cent. So, for us there is no such problem,” said SC Kalia, executive director, Union Bank of India.