Term deposits (TDs) accretion is gathering steam in the wake of banks’ increasing interest rates to mobilise resources via this mode even as current account and savings account (CASA) deposits growth is moderating.

Growth (y-o-y) in TDs rose to 10.2 per cent in September 2022 from 6.4 per cent a year ago, whereas CA and SA deposits growth moderated to 8.8 per cent and 9.4 per cent from 17.5 per cent and 14.5 per cent, respectively, a year ago, according to RBI’s latest report on Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks (SCBs).

The share of savings deposit in total deposits, which increased from 32.4 per cent in June 2019 to a peak of 35.2 per cent in June 2022, moderated marginally to 34.7 in the latest quarter.

Deposit mobilisation

Private sector bank group has been outpacing public sector banks, foreign banks and regional rural banks in deposit mobilisation, per the report.

Banks are increasing TD interest rates as deposit growth are lagging credit growth.

According to the Quarterly Statistics Report, bank credit growth improved further to 17.2 per cent (y-o-y) in September 2022 from 14.2 per cent a quarter ago and 7.0 per cent a year ago.

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However, aggregate deposits growth (y-o-y) which remained in the close range of 9.5-10.2 per cent since June 2021, stood at 9.8 per cent in September 2022.

The median TD rate of SCBs, which reflects the prevailing card rates on fresh deposits, increased by 26 basis points (bps) during May-September 2022, per a RBI report.

Tenor maturities

Transmission to the median TD rate on fresh deposits of domestic banks has improved to 27 bps during the same period, the report said. The extent of pass-through to term retail deposit rates, however, has been higher for longer tenor maturities.

The median term deposit rates (that is the average card rates on retail deposits) on fresh deposits increased by 48 bps during May to October 2022.

Banks have increased their bulk deposit rates higher than retail deposit rates.

Since December 2020, bank branches in metropolitan centres have been recording higher annual deposit growth than those in rural, semi-urban and urban areas.

CD ratio

All-India credit-deposit (CD) ratio increased further to 74.8 per cent in September 2022 from 73.5 per cent a quarter ago and 70.0 per cent a year ago, per the report.

CD ratio for metropolitan bank branches, which have a dominant share in the banking business, stood much higher at 87.6 per cent in September 2022 (82.8 per cent a year ago).

This ratio indicates how much of each rupee of deposit is going towards credit markets.

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