Rising credit demand from companies and consumers has pushed annual credit growth to a decade high of 17.95% as of October, compared to a five-year average of 9.7%. reserve Bank of India shows. However, deposit collections have failed to keep pace and still remain close to their five-year average of 9.4%, prompting bankers to look for ways to attract deposits.
Lenders have to compete liquidity with equity and debt fund Which offer the potential for better returns than bank deposits. as inflation According to the government, the real return on bank deposits, which is around 6% annually in most cases, has risen to a five-month high of 7.4%. Rate of interest For two years, remains negative.
According to Deputy Chief Rating Officer Krishnan Sitaraman, “the banks are funding the majority of credit growth through liquidity built up through deposits coming in from the coronavirus.” CRISIL LIMITED., the Indian unit of S&P Global Ratings. “They need to deposit the amount now.”
video of an officer Canara Bank, an Indian state-run lender, advertising its deposit schemes through a megaphone on footpaths on the outskirts of Mumbai is going viral on Twitter. A spokesperson for the bank declined to elaborate on how many of its executives are resorting to this tactic to raise funds.
During this, Axis Bank Limited., which saw net income rise 70% in the September quarter over the previous year on loan growth, is tying up with mom-and-pop stores to sign up new customers. The lender is doing “franchise sweat” to collect deposits, said Ravi Narayanan, head of retail liabilities, branch banking and products at the lender, at a media briefing.
Lenders are also increasing deposit rates to make it more attractive to customers. state Bank of India Data available on its website shows that interest rates on some deposit schemes have increased by 60 basis points in the last 30 days.
Pritesh Bamb, principal analyst at DAM Capital Advisors Ltd., reports five of the country’s six largest banks, “There is no doubt that deposit rates will rise further as banks do not want to slow down credit growth after several years. Huh.” Earnings for the latest quarter either matched or exceeded analyst expectations due to growth in earnings from debt.
Still, loan growth could outpace deposit growth by the end of March, according to estimates by Bloomberg Intelligence analyst Rena Kwok.