The share of term deposits in scheduled commercial banks (SCBs) total deposits increased to 60.3 per cent in December 2023 from 57.2 per cent in March 2023, according to RBI’s quarterly data.

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Rising return on term deposits (TDs) is driving the compositional shift in deposits of SCBs, the central bank said.

The weighted average domestic term deposit rate (WADTDR) on fresh and outstanding deposits increased by 246 basis points (bps) and 180 bps, respectively, during May 2022 to December 2023 period, per RBI’s latest monthly bulletin. Hundred basis points equal a percentage point.

Interest rates on TDs of more than one year duration ranged from 6 per cent to 7.25 per cent as of December-end 2023. The lagged effect of pass through of policy rate increases into deposit and certificates of deposit rates has exerted pressure on banks net interest margins, the bulletin said.

Depositors are making the most of high deposit rates. On an incremental basis, TDs accounted for nearly 97.6 per cent of the total deposits during April-December 2023 and the share of current account and savings account (CASA) deposits went down, RBI’s quarterly Basic Statistical Return (BSR) data for December, 2023 show.

Deposits moved to higher interest rate buckets, with the share of term deposits bearing over 7 per cent interest rate rising to 61.4 per cent of the total term deposits in December, 2023 from 54.7 per cent a quarter ago and 33.7 per cent in March 2023, per BSR. 

As of December 29, 2023, SCBs total deposits stood at about ₹201 lakh crore. Of this, TDs accounted for 88 per cent and balance was CASA deposits.

CASA accretion from RuSU branches

Rural and semi-urban branches together accounted for 67.2 per cent of incremental CASA deposits during April-December 2023, whereas their combined share in total term deposits during October-December 2023 was much lower at 21.7 per cent, RBI said.

Nearly two thirds of the incremental term deposits during October-December 2023 were of the size ₹1 lakh to less than ₹1 crore – the corresponding share in the previous quarter was 46.5 per cent, it added.

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“Female customers made significant contribution in deposit accretion. Their share in incremental CASA, term and total deposits during October-December 2023 were 63.4 per cent, 36.1 per cent and 40.1 per cent, respectively.

“Their share in total deposits increased to 20.6 per cent in December 2023 from 20.2 per cent in September 2023,” the central bank said.