Banks have cut down their reliance on wholesale/bulk deposits during the past fiscal. The effort to limit bulk deposits is visible both in the reduced amounts they have mopped up from their top 20 depositors as well as in the relative proportion of those deposits to total deposits in 2010-11.

Generally banks tend to go in for bulk/wholesale deposits (deposits above Rs 1crore or Rs 5 crore in some cases) when they want to show rapid balance-sheet growth or spot a good lending opportunity for which they urgently need to mop funds.

Command a premium

Typically, top corporates (including public sector units), park their surpluses in those deposits whose tenure can vary from a week to a couple of months. Wholesale deposits do command a premium over the card rates offered to retail customers — anywhere from 0.50 percentage points to 2 percentage points depending on the demand in the market.

Banks don't mind this extra payment since servicing costs are lower. However, a high reliance on this form of deposits can usually skew their net interest margins.

Banks such as State Bank of India, Punjab National Bank and Oriental Bank of Commerce reduced the total amount they mopped up from their top depositors.

State Bank reduced its total deposits from its top 20 by about Rs 2,000 crore and as a proportion brought it down to 4.3 per cent of its total deposits compared to 5.24 per cent in 2010 and 6.3 per cent in 2009.

Oriental Bank cut its dependence on its top 20 depositors more drastically, halving them during the year to about Rs 13,508 crore. This brought the proportion of its top 20 to about 9.71 per cent of total deposits compared with 22.41 per cent in the previous fiscal.

Among private sector banks, ICICI Bank and Kotak Bank also matched those efforts by bringing down their dependence on the top twenty.

There were a few exceptions that went the other way and increased their reliance on such deposits. Bank of Baroda, Axis Bank and to a lesser extent HDFC Bank went in for more of those deposits as compared to the previous fiscal.

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