The Hindu Business Line : Short-term deposits moving up slowly!

Chennai, July 26 Bank depositors put a bulk of their money in short-term deposits, especially below one year. Driven partly by the incentive of higher rates for such deposits offered by many banks during the past year, depositors have parked their money across different periods starting from a fortnight to a year and more.

Banks offered a rate of 9.5 per cent to 10.5 per cent for deposits of periods ranging from 12 months to 18 months through last year.

A look at the residual maturity pattern of deposits as of March 2007, given by 27 public sector banks, provides an idea of how this money is parked. The list of 27 banks includes IDBI but not State Bank of Saurashtra for whom the disaggregated data were not available. These 27 banks together accounted for deposits of a little over Rs 19.38 lakh crore as of end March 2007.

The increasing shift to short-term deposits is subtle and visible when seen over a few years.

For instance, these deposits (of lesser than one-year duration) constituted about 42 per cent of total bank deposits as of end March 2007. Two years ago, such deposits constituted about 36 per cent.

Medium-term deposits (1-3 years) were also popular as evident from the fact that 29 per cent of deposits are in this category.

Although this category of deposits used to be stable, there is a slight dip over the past two years. This time bucket of (1-3 years) had 35 per cent of the deposits two years ago.

Some banks have a very high proportion of depositor money classified in the above 5-year period. Punjab National Bank, for instance, has 65 per cent of its deposits classified under this category, while Indian Overseas Bank has nearly 38 per cent of its deposits in that time bucket. The average for the system is about 17.6 per cent.

The high level of deposits in this category could also be because the RBI allows banks to consider a portion of stable deposits as part of the 5-year deposits. For these banks, these stable deposits probably constituted a high proportion.

More Stories on : Public Sector Banks | Fixed Deposits | Interest Rates

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Faster certification for imported cement

NCAER biz confidence index down 13.4 points

Select PSUs can now invest in equity mutual funds

Diversified equity funds broadbasing portfolios

Land space talk pushes up HDIL

Scrapping of sugar exports release order upsets industry

Bharti Airtel: Mobile additions ring in growth

Bharti Airtel net doubles to Rs 1,512 crore in Q1

ABB India Q2 net rises 51% at Rs 109 cr

Maruti Q1 net grows 35%

Tata Motors seen as front runner for Ford’s Rover, Jaguar

Short-term deposits moving up slowly!

Rush hour