Deposit growth tapers as investors put money in gold, MFs

Already facing a slowdown in credit growth, banks now have to struggle with declining deposits too as both investors and corporates continue to move money out of bank deposits to other avenues like liquid mutual funds and gold.

 

As per the latest RBI data, deposits in the banking system have shrunk by 0.28% in the period between October 31-November 14. However, on a year-on-year basis deposits swelled by 12.1% to Rs 82,53,630 from Rs 73,58,527 in the same period a year ago Financial Astrology Trading Tips

 

The rate of growth has also tapered off. As per RBI data, on April 18 deposits in the system were growing at a pace of 15.31% as compared to the same period last year. However, in the last three fortnights, deposit growth rate has been hovering in the range of 12-12.60%.

 

“Deposits have been slightly under pressure as consumers have been pulling out money for the festival season,” said Arundhati Bhattacharya, Chairman, State Bank of India.

 

However, bankers don’t see this trend limited to the festival season 

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A senior State Bank of India executive said banks are not encouraging new deposits. 

 

“Apart from this, the retail customers are also using money to buy equity shares and gold. On the corporate front also, for want of investment opportunities in business, some corporate treasuries are moving money in deposits to debt schemes of mutual funds to benefit from falling bond yields,” he added Financial Astrology Trading Tips

 

As per Association of Mutual Funds of India data, the asset under management in liquid funds have increased by a whopping 51% on a month-on-month basis. At the end of October, AUM in liquid funds had grown to Rs 27,88,07 crore from Rs 18,45,25 crore in September this year.

 

Currently, banks are sitting on surplus cash when the credit demand is tepid. But that is hardly a solace for bankers. They are apprehensive about the growth rate of deposits coming under pressure.

 

Sumit Bali, Executive Vice President-Personal Assets, Kotak Mahindra Bank said, “We are also concerned about the rate of deposit growth coming down in the system. It will continue to be a challenge in the coming months as usually it is around this time that people pull out money for tax and other investments.”