SBI Chief confident in deposit mobilization, despite challenges

banks launched limited-period special FD schemes

State Bank of India (SBI) Chairman Dinesh Khara expressed confidence in the bank’s ability to mobilise deposits effectively, despite heightened competition among banks offering increased short-term deposit rates to attract customers.

Speaking at the 38th regional conference of the Western India Regional Council, Khara stated, “We are in a position to support our loan book growth well. So, I think as long as we can support the loan book growth adequately, we do not foresee any challenges.”

Banks introduce special fixed deposit schemes

In response to a slowdown in deposit growth, several Indian banks have launched limited-period special fixed deposit (FD) schemes with attractive interest rates for specific tenures:

• HDFC Bank, the country’s largest private-sector lender, has introduced a special FD scheme offering interest rates of 7.35 per cent for a 35-month tenure and 7.4% for a 55-month tenure on deposits below Rs 3 crore.
• ICICI Bank revised its FD interest rates effective July 2, 2024, now offering rates between 3 per cent and 7.2 per cent for regular customers, and between 3.5% and 7.75% for senior citizens.
• Axis Bank also adjusted its term deposit rates from July 1, 2024, with interest rates ranging from 3% to 7.2 per cent for regular customers and 3.5% to 7.75% for senior citizens.

Banking system vs. Mutual Funds and markets

Addressing concerns about deposit growth challenges amid a booming mutual fund industry, Khara highlighted that in developing countries, banking systems typically outsize the financial markets.

“When we look at developed markets, we observe that markets become bigger than the banking system. However, in developing countries, the banking system generally remains larger than the markets. Even in the UK, the banking system continues to be bigger than the markets. Ultimately, it comes down to investor choice and the variety of products offered by the banking system,” he explained.

SBI’s robust financial performance

SBI reported strong financial performance in the first quarter of the current fiscal year (Q1 FY25):

• Credit Growth: The bank’s credit grew by 15.39 per cent year-on-year (YoY), with domestic advances increasing by 15.55 per cent and advances from foreign offices rising by 14.41 per cent.
• Deposit Growth: Total deposits reached Rs 49,01,726 crore as of June 30, 2024, marking an 8.18 per cent increase from Rs 45,31,237 crore on June 30, 2023. Current Account Savings Account (CASA) deposits grew by 2.59 per cent YoY.
• CASA Ratio: The CASA ratio stood at 40.70 per cent as of June 2024, experiencing a slight decline of 218 basis points compared to the previous year.

Khara’s statements and SBI’s performance indicators underscore the bank’s resilience and strategic positioning in sustaining growth and navigating competitive pressures within the banking sector.