RBI monetary policy review: Bulk deposits limit for banks may be raised

Likely to be increased to Rs 3 cr

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The Reserve Bank of India (RBI) has proposed to revise the bulk deposit limit for scheduled commercial banks (SCBs) and small finance banks (SFBs) to Rs 3 crore.

The limit for bulk deposits was increased in 2019 for SCBs and SFBs to Rs 2 crore from Rs 1 crore earlier.

Likewise, the bulk deposit limit for local area banks has been proposed at Rs 1 crore or above as applicable to regional rural banks (RRBs)

Speaking at the post policy press conference, RBI Deputy Governor Swaminathan J said it is based on a routine review and is likely to ensure better asset-liability management for the lenders. It will also help them to classify bulk and retail deposits.

“Rationalising the definition of bulk deposit from Rs 2 crore to Rs 3 crore will facilitate better asset-liability match for All Scheduled Commercial Banks by reducing sensitivity to interest rate fluctuations,” said Dinesh Khara, Chairman of State Bank of India (SBI).

Speaking on the impact of the revision on the cost of funds, Swaminathan J said even if there is an impact on specific entities, the banking system is not likely to be affected.

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“Whether it is likely to increase the cost of deposit is something which will be purely entity dependent. It will depend on to what extent they (entities) are dependent and in what segment they play. So, there may not be any systemic impact in our view. But certain entities may either have a beneficial or a detrimental impact. It depends upon how their liability side is managed. But we don't expect any systemic impact on account of this change,” Swaminathan said.

According to analysts, the change in definition is not likely to result in major changes for banks.

Shivaji Thapliyal, head of research, YES Securities, said, “We do not think the change in definition of bulk deposits from the earlier threshold of Rs 2 crore changes anything significantly on the ground in terms of the need for retailising or granularising the liability profile for banks. We note that deposits as small as Rs 1 crore can come from rate shoppers and prove to be fickle. This is akin to a deposit that may be officially defined as a bulk deposit.” 

Easing up
 

Limit for bulk deposits was increased in 2019 for SCBs and SFBs
 

Increased as ‘single rupee term deposits of Rs 2 crore and above’ from Rs 1 crore
 

Bulk deposits limit for local area banks has been proposed to be Rs 1 crore or above
 

The banking system may not be affected, said RBI Deputy governor