Savings deposit growth in Q2 slumps to 9.4% YoY while FDs gain traction

Growth of money kept in current accounts moderated to 8.8% this September, from 17.5% a year ago

The growth of low-cost deposits – current accounts and savings accounts – slowed down sharply year-on-year in September 2022, due to the impact of liquidity conditions and interest rate hikes.

The growth of money kept in current accounts held with banks moderated to 8.8 per cent YoY this September, from 17.5 per cent a year ago. The saving deposits growth rate dipped to 9.4 per cent from 14.5 per cent in September 2021.

The Reserve Bank of India said in a statement that the share of savings deposit in total deposits had risen from 32.4 per cent in June 2019 to a peak of 35.2 per cent in June 2022. However, it moderated marginally to 34.7 per cent in September. RBI did not describe the trend in current account deposits.

"The (YoY) growth in term deposits rose to 10.2 per cent in September 2022 from 6.4 per cent a year ago. The private sector bank group has been outpacing public sector banks, foreign banks and regional rural banks in deposit mobilisation," RBI added.

Meanwhile, rating agency CareEdge in analysis of Q2FY23, said deposit rates are expected to rise as the competition for them would increase due to liquidity issues. This comes amid strong underlying credit demand, coupled with a widening difference between credit and deposit growth rates.

Term deposits are expected to rise faster than CASA over the next few quarters. Banks that have a higher CASA share and proportion of floating loans are expected to gain and protect the NIM in the current rising interest rate scenario, the rating agency added.

RBI said the year-on-year aggregate deposit growth, which had remained range-bound at 9.5-10.2 per cent since June 2021, stood at 9.8 per cent in September 2022. Since December 2020, bank branches in metropolitan centres have been recording higher annual growth than those in rural, semi-urban and urban areas.