 "BFSI Summit: 'Service key to mobilising deposits, not just interest rates'")
At the Business Standard BFSI Insight Summit on Wednesday (November 6), top executives from India’s private banking sector spoke about the challenges of mobilising deposits. In a panel titled ‘Bank deposits sahi hai?’ the industry captains highlighted that raising interest rates alone may not be enough to attract deposits. Instead, the focus should be on convenience, service delivery, and brand trust.
A shift in savings habits is impacting bank deposits, believes Rakesh Sharma, managing director & CEO of IDBI Bank. “In 2011-12, the savings rate was around 39 per cent, but with the increase in consumption and alternative investment opportunities, deposits have declined,” he said. Sharma added that while bank deposits remain a safe investment, customers need to assess their risk appetite. “Low deposits do impact our profitability. We will have to come up with more innovative schemes to shore up deposits,” he said.
Sharma also addressed the need for responsible cross-selling: “I always tell my staff to go for cross-selling but not mis-selling.” He acknowledged that although deposits have decreased, banks still offer strong points such as liquidity and lower risk. “People have to assess their own risk-taking capacity but bank deposits, I still feel, are the best option,” he said.
Technology, service key differentiators
V Vaidyanathan, managing director and CEO of IDFC First Bank, remarked on the distinct roles of savings accounts and investment products. “The use case for deposits is different from that of mutual funds. Technology, service, and brand recognition are all crucial factors,” he said. According to Vaidyanathan, while household deposits may have decreased, money remains within the banking system. “Use cases for savings and investment accounts are different. You can’t pay an EMI from mutual funds,” he explained, highlighting that both types of financial products are essential for the economy.
Efficiency boost and structural changes ahead
Prashant Kumar, CEO of YES Bank, noted the improvements in system efficiency, both on the government and corporate sides. “There has been a huge improvement in system efficiency, so money is no longer just sitting idle in the banking system,” he explained. While some funds are moving to other asset classes, Kumar maintained that this does not pose a fundamental issue for banks.
Kumar also spoke on potential structural changes. “Large corporations are used to investing in bonds, but there may be a shift where banks will need to focus on managing assets, liabilities, and risk,” he said.
‘Flexibility in interest rates needed’
Speaking at the Business Standard BFSI Insight Summit, R Subramaniakumar, MD & CEO of RBL Bank, reiterated that simply adjusting interest rates is not enough to effectively attract deposits. “At a certain base level, interest rates aren’t the differentiator; it’s the service quality that matters,” he noted. Subramaniakumar suggested that banks should offer flexibility in interest rates based on customer risk profiles, which would broaden financial inclusivity.
He highlighted the changing composition of deposits over the past decade, stating, “Deposit is no longer confined to the realms of a decade before; the composition has changed. People’s surplus is now moving to alternative options.” Ultimately, he concluded that deposits remain an essential and reliable choice: “Deposit sahi tha, abhi bhi sahi hai, aur future mein bhi sahi hoga.”
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