Aggressive Private Lenders Corner A Larger Piece Of Fresh Deposits

Public sector banks, despite their government backing and widespread network, are falling behind in garnering fresh deposits, shows data released by the Reserve Bank of India on Friday. These lenders lost the most amount of deposit market share in at least the last five years in 2018-19, the data showed.

As of March 31, 2019, public sector banks controlled 63.23 percent of all outstanding deposits compared to 66.86 percent a year ago. Since 2015, these lenders have lost more than 10 percentage points in deposit market share, shows the data.

This share of deposits has been picked up by private banks, which controlled nearly 29 percent of the banking system’s deposits as on March 31, 2019. This compared to 25.4 percent last year and under 20 percent in 2015.

Private banks are growing deposits at a faster pace than government-owned peers across all categories in 2018-19.

In the coveted category of low-cost deposits, private banks saw an increase of 19.7 percent in savings account deposits and a 17 percent increase in current account deposits. Public sector banks saw a much slower 5.9 percent increase in savings deposits and a 2.55 percent rise in current account deposits.

In the term deposits category, private banks saw a jump of 29 percent year-on-year, while public sector banks saw a rise of 4 percent.

According to Asutosh Mishra, head of research at Ashika Stock Broking, private banks have been gaining more government deposits over the last few quarters, which pushes up their overall deposit base.

“Public sector banks have historically held bulk deposits of government-owned entities, which is now slowly flowing toward private banks,” Mishra said. “For public sector lenders, more granular retail deposits make sense.”

According to data available with the RBI, as on March 2019, public sector banks accounted for Rs 9.74 lakh crore, or 82 percent of the Rs 11.86 lakh crore worth of the deposits of central and state government entities. Private banks accounted for Rs 1.87 lakh crore.

Urban vs Rural

Most of the private bank deposits still continue to flow in from metropolitan areas.

Out of Rs 36 lakh crore worth total outstanding deposits with private banks, Rs 23.51 lakh crore, or 65 percent, came from customers in metropolitan areas. Deposits garnered from urban and metropolitan areas together made 85 percent of all private bank deposits.

Customers in rural and semi-urban areas continue to choose state-run banks for their deposits, perhaps due to their wider networks.

Deposits from rural and semi-urban areas made up 31.6 percent of public sector bank deposits, while urban and metropolitan deposits accounted for 23.4 percent and nearly 45 percent, respectively.