The State Bank of India has changed its tack for growing current account deposits as the Centre’s adoption of the “just-in-Time” procedure for the release of funds has reduced float for banks.

India’s largest bank has stepped up the opening of current accounts (CAs) for mid-range segment and high-value customers, newly incorporated companies, and start-ups and started transaction banking hubs to grow current accounts and make up for the reduced float.

A CA deposit is opened by businesses and enterprises for multiple payments, receipts, and other transactions. This deposit does not earn any interest. It comes with an overdraft facility.

Float is generated for banks when there is a time difference in processing and crediting payments to customer accounts. So, due to the time elapse before customers’ withdraw money, a float is created, and banks can use the same.

Attributing the decline in current account and savings account (CASA) deposits in overall deposits to a behavioural shift, Dinesh Kumar Khara, Chairman, SBI, emphasised that during inflationary times there is a tendency for people to look at products that offer returns that beat the inflation rate.

Decline in CASA deposits

SBI’s CASA deposits declined to 41.88 per cent of domestic deposits (amounting to ₹45,03,340 crore) as of September 2023. CASA deposits constituted 44.63 per cent (of domestic deposits aggregating ₹40,28,012 crore) as of September 2022.

So, in the context of the decline in CASA, SBI is trying to increase its current account as compared to its savings account (SA), he said.

As of September 2023, SBI’s CA and SA deposits grew by 8.77 per cent and 4.34 per cent, respectively, year-on-year (yoy). CA and SA accounted for 5.62 per cent and 36.26 per cent, respectively, of domestic deposits.

“There is a remarkable change in the composition of CA. Earlier, we used to have CAs only for government entities. About a year ago, there was a change in the business practices of the government.

“Now they are going to have JIT (Just-In-Time) funding. This has almost dried up the potential for CASA (via this route). So, about six months ago, we started our transaction banking hub,” Khara said.

SBI has already opened these hubs at about 34 locations across the country.

“And that is one of the reasons why we are witnessing this kind of CA growth. And I am quite hopeful that our focused efforts in this direction will yield much better results,” the SBI chief said.

Banking expert V Viswanathan said due to the development of different payment systems like the Real Time Gross Settlement System (RTGS), National Electronic Funds Transfer (NEFT), Immediate Payment Service (IMPS), cheque truncation followed now for clearing settlements, the float funds as well as the float time available in the banking system have come down over the years.

The Finance Ministry’s Department of Expenditure has told all ministries and departments that the principles of ‘just in time release’ should be applied for releases in respect of all payments to the extent possible and to bring about more efficiency in cash management at both the Centre and State-levels.

This is also aimed at better monitoring the availability and utilisation of funds released to the States under the Centrally Sponsored Schemes (CSS) and reducing float.

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