SBI may retain up to 40 per cent of deposits

In the interview with an international weekly business magazine, State Bank of India (SBI) Chairman Arundhati Bhattacharya said that she was unable to give a precise estimate owing to the lack of clarity about the proportion of money that had come from businesses and individuals. 

Arundhati said, "SBI could retain between 15 and 40 per cent of the massive deposits it received since the government removed popular bank notes from circulation in November. Much of it (money from business) will be taken out because people may want to use it in their business again." 

"However, if much of this money is from savings of people, which was sitting in their cupboards or wherever, then obviously it will not go out. Once it is in the bank, it will stay in the bank and therefore that is why we have a very wide kind of range," Bhattacharya said in the interview on the sidelines of the World Economic Forum in Davos, Switzerland. 

The SBI Chairman's comments came amid uncertainty among investors over whether or not the increased bank deposits since demonetisation will benefit banks. On January 2, Bhattacharya had announced a rate cut and said SBI was witnessing "unprecedented liquidity," as low-cost deposits had increased by Rs 1.4 lakh crore after the notes ban. 

Arundhati concluded that the company's loan book had contracted since November and the advances in the current financial year were expected to expand to 9 per cent, compared with about 6.7 per cent as of December 31.