From Canara Bank to HDFC Bank, banks up the ante on deposit drive

Private sector lender Bandhan Bank on the other hand, decided to up their rate substantially over others. On Tuesday, it announced a new bucket of 1 year 9 months at an attractive interest rate of 8%

From offering insurance cover to enhancing customer engagements and higher rates, commercial banks are devising multiple strategies to mobilise deposits following a nudge from Reserve Bank of India Governor Shaktikanta Das. Das called for product innovation and full utilisation of branch networks to raise resources.  

At a post-Budget press meet in New Delhi last week, Union Finance Minister Nirmala Sitharaman had also urged banks to devise innovative schemes to boost deposit mobilisation.
 

State-run Canara Bank is set to launch two new deposit products in October, targeting the younger population, particularly those enrolled in professional courses. The Bengaluru-based bank is also offering term life insurance to savings account holders and a zero-balance savings account facility for the entire family if one member’s salary is drawn from the bank.
 

 It has tied up with medicine aggre­gator 1mg to offer senior citizens discounts on purchases.

“People these days do not keep large sums in their savings accounts. Anytime they can invest or liquidate with the help of digital channels. Under such circumstances, only rate of interest cannot attract low cost deposits (savings and current account deposits). So banks need to offer more,” said K Satyanarayana Raju, managing director (MD) and chief executive officer (CEO) of Canara Bank.

Raju said the bank was expanding its network by opening 250 branches this financial year, up from 150 in the previous one. “Based on analytics, we will identify the potential locations, cross verify by going to the field and then identify the suitable premises,” he added.

The RBI is pushing banks for resource mobilisation as the gap between credit and deposit growth has widened. It has cautioned that relying heavily on short-term non-retail deposits and other instruments to meet the incremental credit demand could lead to structural liquidity issues.

“We offer a bouquet of financial services to our customers. Once we onboard a customer, we engage with them, then we encourage them to pay their utilities through our bank. This builds up balances in the bank,” said R Subramaniakumar, MD and CEO of RBL Bank.

The bank also opens savings accounts for all the retail and housing loans customers as well as current accounts for loans against property. “We encourage these customers to pay their EMIs through these accounts,” Subramaniakumar told Business Standard during an interaction.

Kolkata-based Bandhan Bank has adopted a ‘liability-first’ strategy while announcing the new deposit scheme. “In response to evolving market conditions and our commitment to our customers, Bandhan Bank is excited to introduce our new fixed deposit bucket,” Rajinder Babbar, executive director and chief business officer of Bandhan Bank.

Like Bandhan, several banks are launching special deposit schemes with higher interest rates on specific tenures to mobilise deposits. Country’s largest private-sector lender – HDFC Bank – has launched a ‘Special Edition Fixed Deposit’ offering 7.35 per cent for tenure of 35 months and 7.40 per cent for 55 months. Senior citizens will receive an additional 0.50 per cent interest over these rates.

To boost deposits, banks are also exploring new sectors, such as health care and housing societies.

“Many banks, including ours, have introduced fixed deposit (FD) schemes like the 444-day FD with attractive rates, which are helping us increase deposits,” said a senior bank official.

State Bank of India, the country’s largest lender, has launched the ‘Amrit Vrishti’ retail term deposit scheme, offering 7.25 per cent interest for a 444-day tenure.

Similarly, Bank of Baroda has introduced a special deposit scheme, offering 7.25 per cent for 399 days and 7.15 per cent for 333 days. The bank is promoting its ‘Salary Classic Account’, which includes access to overdraft, a lifetime free RuPay Platinum debit card, credit card, and other benefits.

ICICI Bank’s senior management has guided that their analysis of client coverage reveals that there is plenty of scope to expand their share of wallet even within their existing clients. They still have ample scope of improvement in targeting the self-employed individuals, scale up further the private banking and wealth management clientele, focus on family offices, etc., the management told Macquarie Research. 

“So all of these can help them gain market share on the liabilities as well as asset side of the business. Less than 50 per cent of the customers have a primary banking relationship with them and that gives them ample opportunities to scale up things further,” Suresh Ganapathy, head of financial services research, Macquarie Capital, said in a report earlier this month.

Mobilising deposits

Canara Bank plans to woo youth taking professional courses with two products from Oct

Some state-run banks explore sectors like health care and housing societies

Bandhan Bank raises fixed deposit rates to 8%

HDFC Bank launches special edition fixed deposit at 7.35% for 35-month tenure

SBI launches new variant of retail term deposit scheme