Deposit mobilisation not a challenge for bank: SBI chief Dinesh Khara

In response to declining deposits, several Indian banks have introduced limited-period special fixed deposit schemes with higher interest rates for specific tenures

State Bank of India Chairman Dinesh Khara on Friday said that he does not foresee any challenges for the bank in deposit mobilisation, despite the intensified competition among banks to attract deposits by raising short-term deposit rates.

Speaking on the sidelines of the 38th regional conference of Western India Regional Council, Khara said: “We are in a position to support our loan book growth well. So, I think so long as we can support the loan book growth well, I don't think we do have any challenge.”

In response to declining deposits, several Indian banks have introduced limited-period special fixed-deposit (FD) schemes with higher interest rates for specific tenures.

HDFC Bank, India's largest private-sector lender, rolled out a special edition FD scheme, offering attractive interest rates for select tenures of 35 and 55 months. Customers can earn 7.35 per cent interest for a 35-month deposit and 7.4 per cent for a 55-month deposit, for amounts below Rs 3 crore.

ICICI Bank recently updated its FD interest rates, effective from July 2, 2024. The revised rates range from 3 per cent to 7.20 per cent for regular customers and 3.5 per cent to 7.75 per cent for senior citizens. Similarly, Axis Bank adjusted its term deposit rates from July 1, 2024, with rates also spanning 3 per cent to 7.2 per cent for regular customers and 3.5 per cent to 7.75 per cent for senior citizens.

Further, on the challenges of deposit growth in the banking system and the booming mutual fund industry, Khara said in developing countries, the banking system typically surpasses the size of the markets.

“When we look at the developed markets, there we have seen the markets become bigger than the banking system. But as of now, of course, in the developing countries, we have generally seen that the banking system is bigger than the size of the markets… Even in the UK also, the banking system continues to be bigger than the markets. So, I think much of it will be the choice of the investors and the kind of products which will be rolled out by the banking system,” he said.

SBI's credit growth stood at 15.39 per cent on a year-on-year (Y-o-Y) basis in the first quarter of the current financial year (Q1FY25), with domestic advances growing at 15.55 per cent Y-o-Y and foreign offices' advances rising by 14.41 per cent Y-o-Y.

Total deposits of the bank grew 8.18 per cent to Rs 49,01,726 crore as on June 30, 2024 as against Rs 45,31,237 crore as on June 30, 2023, out of which CASA deposit grew by 2.59 per cent Y-o-Y. CASA ratio slipped 218 bps to 40.70 per cent as of June 2024.