Pvt, foreign banks see deposit growth drop
Amid the growing perception that depositors are withdrawing funds from private and foreign banks and are instead parking them with public sector players, the latest data released by the Reserve Bank of India (RBI) showed that there has been a significant shrinkage in growth of deposits with private and foreign banks.
Significant drop in deposit growth of private and foreign banks pulled down the overall growth in deposits on year-on-year (y-o-y) basis, of all scheduled commercial banks to 21.2 per cent for the week ended January 2, 2009 from 25.1 per cent in the corresponding period a year ago.
While for foreign banks the deposit growth declined to 12.1 per cent from 34.1 per cent, the private sector banks witnessed their deposit growth dip to 13.4 per cent from 26.9 per cent on y-o-y basis.
In the same period, for the public sector banks, deposit growth was estimated at 24.2 per cent, the same growth rate as last year.
Standard Chartered Regional CEO Neeraj Swaroop, however, said that the picture was skewed due to the performance of a few banks, which were seeing a rapid rise in the last three-four years. “We have not seen a drop in growth rates. It may be the case with some of the US-based banks that operate in India and a few large private banks,” he said.
In recent months companies such as Infosys have moved deposits from private and foreign banks to public sector banks, mainly because the the state-owned players were offering higher interest rates. Since December, the public sector players have decided to reduce bulk deposit and focus more on current account and saving account balances.
On lending side, bankers, said that with overseas funding sources drying up and companies unable to access money from the equity markets, the demand has shifted to the domestic arena.
Similarly, the data showed that public sector banks have seen a sharp increase in lending for the year up to January 2, 2009. In contrast, private and foreign banks have seen a drop in credit growth during the period.
| Bank group-wise deposits and credit | ||
| In per cent | Jan 4, 08 | Jan 2, 09 |
| Deposits | ||
| Public sector banks | 24.2 | 24.2 |
| Foreign banks | 34.1 | 12.1 |
| Private sector banks | 26.9 | 13.4 |
| Commercial banks* | 25.1 | 21.2 |
| Credit | ||
| Public sector banks | 19.8 | 28.6 |
| Foreign banks | 30.7 | 16.9 |
| Private sector banks | 24.2 | 11.8 |
| Commercial banks* | 21.4 | 24.0 |
| * Includes regional rural banks (RRBs) | ||
On a y-o-y basis, for public sector banks, credit growth increased to 28.6 per cent in January 2009 from 19.8 per cent in January 2008, whereas, credit growth of private banks dipped 105.1 per cent from 24.2 per cent to 11.8 per cent in January 2009.
In case of foreign banks, the growth rate has moderated partly due to the experience of their global parents.
On a year-on-year basis, the credit growth of foreign banks operating in India dipped from 30.7 per cent for the year up to January 2008 to 16.9 per cent in January 2009.
In case of Indian private banks, the drop is steeper as many of them, including the likes of ICICI Bank, the largest in the segment, are in an asset shrinking mode. “These banks are now consolidating their business to control non-performing assets (NPAs) and improve recoveries,” said a bank executive.