The Hindu Business Line : Banks mull measures to curb bulk deposit growth

About 30 per cent of deposits now come from bulk funds. Most of the bulk deposits were parked in short duration time deposits. Bankers said despite the informal cap on bulk rates by public sector banks, inflows still continued. Aggregate deposits between April and November this year has grown by Rs 3.44 lakh crore, against Rs 2.54 crore during the corresponding period the last financial year. Time deposits this year till November 30 grew by 3.25 lakh crore.

Faced with this situation, banks were putting in measures to contain bulk deposit growth. Vijaya Bank’s Chairman and Managing Director, Mr Prakash P. Mallya, said, “We have tightened bulk deposits acceptance. Only card rates are offered to bulk depositors.” Card rates for up to one year are currently 9 per cent.

Double-digit rates to bulk deposit have vanished on account of the low credit offtake and high cash reserve ratio of 7.5 per cent. Credit offtake is less than 45 per cent of the gross deposits intake, implying that the funds were parked in investments, almost entirely Government securities.

Not profitable

Bulk of the funds though was parked in short term papers. As a result, bulk deposits were no longer a profitable proposition, bankers said.

In fact, the chase for short term investments has already resulted in pushing down yields for 91 Treasury bills at last week’s auctions down 7.44 per cent, or more than 150 basis points lower than the rates now being offered on such deposits.

As a result, some of the banks were bracing for dropping bulk deposit rates by at least 25-50 basis points in the coming weeks. This was now being mulled for reducing deposit growth rates. Bankers though said only retail deposit rates would be maintained. The purpose was to raise the low-cost mix or CASA in bankspeak. CASA implied current and savings account deposits that comprised only about 25 per cent of the bank resources. Bankers want to raise this mix to over 30 per cent and reduce reliance on bulk funds.

Non-competitive bids

Bankers said that they were also persuading corporates to park funds in government securities.

In fact, some banks are attempting to push insurance, mutual funds and corporate savings directly into T-bills through the non-competitive bid route. This was especially in an environment, where the RBI had relaxed corporate participation by extending the scope of the Constituent Subsidiary General Ledger (CSGL) account in the peak season credit policy.

As a result of these efforts, non-competitive bids have remained high, despite the paring of the notified amount by the RBI.

At last week’s auction for instance, the notified amount for instance for the both the 91-day and 182-day T-bills was only Rs 500 crore. Non- competitive bids for both categories of T-bills were Rs 1,800 crore and Rs 125 crore respectively.

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