The Hindu Business Line : Medium term bank deposits continue to rule supreme!

THE bulk of depositors' money continues to be parked in the 1-3-year time bucket in various banks. An examination of the deposit maturity pattern of 19 public sector banks shows that about 36 per cent of the money is in that slot.

These 19 banks together accounted for deposits of a little over Rs 9 lakh crore as of end March. That was about 70 per cent of the public sector bank deposits as on that date.

The depositor preference for a medium term deposit has remained fairly stable over the past couple of years. Interest rates for depositors did not change much last year. The average rates paid for the 1-3 year deposit was in the region of 5.25-6 per cent.

Although rates in Government securities market went up by close to 2 percentage points, this was not reflected in the interest that banks paid depositors.

The numbers seem to reflect very little change in the overall depositor preferences. Banks have been disclosing this information for the past five years. Of course, there are differences in the maturity pattern of deposits among the various banks.

Some banks, for instance, have a very high proportion of depositor money in the above 5-year period. Indian Overseas Bank, for example, has nearly 43 per cent of its deposits in that time bucket, the highest among public sector banks. United Bank has about 39 per cent of its deposits in this category and Central Bank has about 35 per cent of its deposits in this category.

Asked about the high proportion of above 5-year deposits, Mr Shivaram Swamy, General Manager, Indian Overseas Bank, explained, "A part of it is historical — which have been very long term deposits that come in the over-5 year bucket."

The second reason is that the Reserve Bank of India has allowed banks to consider a part of core funds (from savings bank and current bank accounts) that are stable, as part of the above 5-year deposits. This can be done based on a proper behavioural study of such deposits and subject to board approval, Mr Swamy said.

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