The sudden slump in aggregate deposits after an abrupt increase is a contrarian trend that has emerged in November, according to Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.

As per the provisional data released by RBI for the fortnight ended November 19, all scheduled commercial banks (ASCB) aggregate deposits have slumped by ₹2.7 lakh crore during the fortnight.

The slump in deposits follows an abrupt increase of ₹3.3 lakh crore during the previous fortnight ended November 5.

"Interestingly, such growth in deposits was around 36 per cent of the incremental deposit growth at that point of time. This increase in deposits and subsequent slump is quite a contrarian trend. While it may be exactly difficult to decipher the increase and subsequent decline, it does pose questions on liquidity management/financial stability or a shift in behavioral trend in customer payment habits through digitisation and hence lower currency leakage and concomitant deposit bulge or both," said Ghosh said in the latest edition of SBI Ecowrap

24-year record

According to Ghosh, the fortnightly increase of ₹3.3 lakh crore has never happened during a Diwali week as there is always a currency leakage and concomitant deposit decline. This is also the fifth-largest increase in any fortnight in the last 24 years.

The fortnightly deposit slump in the subsequent fortnight could be due to a large influx of deposits into the banking system for the fortnight ended November 5 in anticipation of a buildup in the rally in stock markets post-primary issuances of new-age companies and others.

"However, when such rally did not materialize, the bulge in banking deposits slumped and almost 80 per cent of deposit bulge was withdrawn. Interestingly, the amount of money parked in fixed reverse repo window jumped from ₹0.45 lakh crore on October 19 to ₹2.4 lakh crore on November 17 and has remained at such level till December 1," Ghosh said.

Published on December 3, 2021