The share of low-cost deposits in the banking system, which is already on a downward slope, could decline further to touch the levels seen before Covid-19 due to the efficient cash management by the government as well as the corporate sector, State Bank of India chairman CS Setty said on Wednesday.
Setty was referring to current and savings account (Casa) deposits of banks, which are typically priced less than term or fixed deposits.
“I will just look at our numbers again, which is a proxy to the banking system. The pre-Covid level Casa ratios are 40 per cent, which went up to 45 per cent post-Covid. Obviously, it is going back to 40 per cent. It may further go down if the efficient cash management, just-in-time cash management of the Government of India comes into picture,” Setty said at an event organised by Bengal Chamber of Commerce and Industry.
“Corporates have adopted efficient cash management now and the government has also moved towards efficient cash management. This means that the float funds will not be available,” he said.
SBI’s share of Casa (domestic operations) in total deposits fell to 40.7 per cent at the end of June as compared to 42.88 per cent a year ago.
Most large banks have seen their Casa ratio falling over the past year as customers are increasingly gravitating towards fixed deposits, which are offering attractive rates.
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SBI chairman, however, said the country’s largest bank would be able to hold on to the current share of low cost deposits.
He said SBI will tap into small businesses to keep their funds with the bank by providing superior services and innovative products like cash pick-up.
He also said it is not that deposits are not growing.
“If you see in absolute numbers, deposits have grown by 58 per cent in five years. And credit has grown by 56 per cent.”
Referring to the stress in retail loans, Setty said: “There is some issue of the small value loan (Rs 50,000-1,00,000). But I think it has not reached the proportion where we need to worry about it.”
He said the recent regulatory norms which reduced the frequency of reporting credit information of borrowers to credit information companies (CIC) to every 15 days from the previous monthly intervals, will help improve retail asset quality.
“Now, RBI has made it mandatory to refresh data within 15 days. Which means that the database lending will become much more robust would help in terms of moderating any slippages, he said.
He said there is a healthy demand for corporate credit, which was also reflected in Q1 growth numbers.
“The good news is that on the corporate side, there is a significant demand for the corporate credit. And last quarter also we had almost 15-16 per cent corporate credit growth. But in the overall balance sheet or asset mix, the shift from the corporate to retail has happened,” he said.
He explained that brownfield expansion is undertaken by the corporate sector using their own cash as they have a strong balance sheet.
“Now, brownfield expansion is being undertaken by their own cash flows because the balance sheet is stronger. Since they are using their own cash, it's not getting reflected in the corporate credit,” Setty added.