For bank deposits, private are back as the preferred choice over public

Sandeep Singh
For bank deposits, private are back as the preferred choice over public

Deposits of top eight private banks including HDFC Bank and ICICI Bank increased by Rs 2.68 lakh crore, higher than the Rs 2.58 lakh crore increase in deposits in the top eight state-owned banks.

In a reversal, depositors over the last six months have preferred to park their money with private banks rather than state-owned banks, according to financial statements of banks over the last four quarters analysed by The Indian Express.

While depositors have been moving towards private sector banks over the last three years, the first half of the calendar year 2019 saw state-owned banks getting back in the game with a sharp increase in incremental deposits. But during July-December 2019, state-owned banks slipped again.

Deposits of top eight private banks including HDFC Bank and ICICI Bank increased by Rs 2.68 lakh crore, higher than the Rs 2.58 lakh crore increase in deposits in the top eight state-owned banks.

EXPLAINED

Public dominates but...

PsBs continue to dominate banking, accounting for roughly 70% of business. But private banks have chipped away. They have opened branches even in rural areas and have better managed mobilisation of deposits. Trust in private sector banks, too, may be growing.

Compare this with the previous six months: During January-June 2019, these eight state-owned banks including SBI and Punjab National Bank accumulated Rs 5.25 lakh crore, more than double of what the eight private sector banks managed (Rs 2.53 lakh crore) in the same six months.

The shifting preference is significant given that state-owned banks still hold bulk of the outstanding deposits.

 

In its recently released Report on Trend and Progress of Banking in India, the RBI, too, had pointed towards the customer shift from state-owned banks to private banks in case of term deposits.

“The average share of PVBs (private banks) in the incremental term deposits during 2016-19 was 81 per cent vis-a-vis 19 per cent in 2011-15. Corresponding numbers for PSBs were 13 per cent and 77 per cent, respectively.”

The aggregate deposits with the eight state-owned banks in calendar year 2019 stood at Rs 66.73 lakh crore compared with Rs 30.99 lakh crore held by the top eight private banks. In other words, state-owned banks roughly hold more than two-thirds of total outstanding deposits.

The eight private banks whose deposits have been counted are: HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank, Federal Bank, Bandhan Bank and IDFC First Bank.

The state-owned banks counted are: SBI, PNB, Bank of Baroda, Canara Bank, Bank of India, Union Bank of India, Indian Overseas Bank and Oriental Bank of Commerce. The deposit figures have been obtained from their quarterly financial statements.

Sources said the incremental deposits of the eight state-owned banks also include interest accumulated. These banks cumulatively held 68 per cent of total outstanding deposits. “Therefore, the net addition of fresh deposits in the last six months in state-owned banks is likely to be significantly lower,” said a banker. An RBI source said preliminary analysis of incremental deposits into banks over the last six months suggested that almost 80 per cent of fresh deposits seem to have been cornered by the private sector.

A closer study of the data shows that State Bank of India has seen a significant increase in its share of incremental deposits cumulatively raised by PSBs over the last two quarters. SBI, which accounted for just 23 per cent of the additional deposits raised by the eight state-owned banks during January-June 2019, saw its share jump to 63 per cent in the following six months. SBI and PNB together accounted for 78.5 per cent of the additional deposits accumulated by the eight PSBs in the list.

Among the private sector banks, too, HDFC Bank took the lion’s share followed by ICICI Bank and Axis Bank.

While HDFC Bank added Rs 1.12 lakh crore, ICICI Bank and Axis Bank added Rs 55,613 crore and Rs 50,998 crore respectively during the six-month period July-December 2019. These three banks accounted for 82 per cent of the deposits raised cumulatively by the eight private banks.