With deposit growth lagging credit growth, the Reserve Bank of India (RBI) said it plans to revise upwards the definition of bulk deposits for scheduled commercial banks (excluding regional rural banks), small finance banks and local area banks.

This is aimed at helping banks’ garner more deposits to support loan growth.

RBI is proposing to revise the definition of bulk deposits as ‘single Rupee term deposit of ₹3 crore and above’ for scheduled commercial banks/SCBs (excluding regional rural banks/RRBs) and Small Finance Banks. Currently, ‘single Rupee term deposit of ₹2 crore and above’ are classified as bulk deposits by these banks.

Further, the central bank also plans to define the bulk deposit limit for Local Area Banks as ‘Single Rupee term deposits of ₹1 crore and above’, as applicable in case of RRBs.

‘Better asset liability management’

Swaminathan J, Deputy Governor, RBI, observed that the raising of the bulk deposit limit is in keeping with the times. It is likely to enable better asset-liability management for banks, helping them in terms of classification of bulk and retail, he added.

On possible concerns that the revision in bulk deposit limit is likely to increase the cost of deposits, Swaminathan said this is something that is purely entity dependent – as to what extent it is dependent on bulk deposits and in the segment in which operates.

“There may not be any systemic impact in our view. But certain entities may either have a beneficial or detrimental impact, depending on how their liabilities side is managed,” he said.

Dinesh Kumar Khara, Chairman, State Bank of India, said the proposed increase in the bulk deposit limit will facilitate better asset liability match for all SCBs by reducing sensitivity to interest rate fluctuations.

Banking expert V Viswanathan said the proposed revision in the bulk deposit definition will help banks to canvass retail deposits easily as it is available to depositors across the banks.

“While liquidity by way of deposits will go up, the cost will also be up as no discrimination in interest rates is allowed on retail deposits (of up to ₹3 crore) of the same tenor and maturity.

“Differentiated interest rate is the attraction of bulk deposits,” he said.