Bank Deposits Seen Swelling

Flight of money from mutual funds and post office savings is expected to swell bank deposits. The trigger point is the Union Budget for 2002-03, which has imposed a 10 per cent dividend tax in the hands of the receiver of dividend and snipped by 50 basis points the small savings rate as also the Government of India Relief Bonds.

Aggregate deposits of the scheduled commercial banks have grown by Rs 1,16,353 crore in the financial year, compared with Rs 1,29,383 crore in the corresponding period last year. Deposit growth in this financial year so far has been lower at 12.1 per cent, as against 15.9 per cent during the year ago period.

 

Bankers expect a sudden spurt in their deposits in the run up to the around 50 basis points cut in the bank rate and repo rate cut, expected ahead of the April credit policy. Once the signal rates are cut, banks will also pare their deposit rates in order to maintain their net interest margins (spreads) and the temporary spurt will taper off, said a senior banker.