Banks’ Deposits Grow At 13%, While Advances At 16%

Banks in India have started facing some headwinds, which is evident from the recent Reserve Bank of India (RBI's) release of the Scheduled Bank's Statement of Position in India as on January 25, 2013. On an aggregate basis, deposits of the scheduled commercial banks grew by 13.08% to Rs 65,27,100 crore while their advances grew by 16.04% to Rs 50,51,200 crore on a YoY basis as on January 25, 2013.   

Well the growth could be considered to be in line with the RBI forecast of deposits and advances growing at 13% and 16% respectively for FY13. However, here, one should note that deposits growth is very slow and is showing signs of moderations when compared to advances growth for the bank. This is because the RBI had earlier estimated advances growth of 17%, which was revised downwards by 100 basis points to 16% later. While in case of deposits, initially the apex had estimated the deposits growth of 15% which was revised downwards by 200 basis points to 13% for FY13.

Further, to look deeper into deposits growth, demand deposits (current and saving account) has seen a muted performance while time deposits (fixed deposits) still sees a decent growth on account of most banks still offering a handsome rate. As on January 25, 2013, the demand deposits grew by 2.41% to Rs 6,09,900 crore while the time deposits increased by 14.31% to Rs 59,17,200 crore.

The recent December quarter numbers of most of the Public banks are also seeing the same trend, while Private players have managed to stay above the industry growth average. We believe that the softening of the rates going ahead would be passed on to the end customers by reducing the deposits and loans rates. This would gel well with the loan portfolio, as it may witness a good growth while on the other hand, customers may go with other investments options which could yield better returns than fixed deposits (rates of which fall going ahead) resulting into lower deposits.

One has to wait and watch as to how the business growth of the banks would pan out going ahead. Nevertheless, we would be updating investors on the same on our website.