The RBI’s first quarter monetary policy review for 2012-13 has been drawn in the backdrop of a disquieting trend in deposit growth in the banking system, says M. Narendra, Chairman and Managing Director, Indian Overseas Bank.
In the current financial year up to June 15, the deposit growth was 14.3 per cent compared with 18.3 per cent last year. The RBI has projected deposit growth at 16 per cent for the full year. However, analysts estimate the growth at between 13.5 and 15 per cent. The slowdown appears to be both structural and due to transient factors such as slowing economic growth and/or sticky inflation, said Narenda in a statement. In the last two decades the share of household deposits has come down while that of government and corporate sectors has gone up. And, in the deposit mix, the share of current deposits has been rising significantly in government and corporate deposits.
Recently, there was also a move to limit such deposits to 15 per cent of the total deposits or roughly about Rs 7 lakh crore to protect banks’ margin and profitability. It is in these circumstances that RBI has released Rs 65,000 crore by way of a one percentage point cut in SLR; it had already frontloaded a deep cut in CRR in March. Banks can use the funds for onward lending or replace high-cost deposits, he said.