Tuesday, February 10, 2009

Public banks deposit growth rise, private, foreign banks see drop

The public sector banks have shown growth in their credits in comparison to their private and foreign competitors. According to latest data released by the Reserve Bank of India (RBI) in due course the depositors have withdrawn funds from private and foreign banks and are investing their money with public sector banks which has resulted in a significant decline in growth of deposits with private and foreign banks.

By the week ended January 2, 2009 there has been significant drop in deposit growth of private and foreign banks which in turn pulled down the overall growth in deposits on year-on-year (y-o-y) basis, of all scheduled commercial banks to 21.2 per cent from 25.1 per cent in the corresponding period a year ago.

Although for foreign banks the deposit growth went down to 12.1 per cent from 34.1 per cent, the private sector banks saw their deposit growth dipping to 13.4 per cent from 26.9 per cent on y-o-y basis.

On the other hand in the same period, for the public sector banks, deposit growth was projected at 24.2 per cent, the same growth rate as last year.

Standard Chartered Regional CEO Neeraj Swaroop, remarked that the picture got twisted due to the performance of a few banks, which were saw a rapid rise in the last three-four years. He informed, “We have not seen a drop in growth rates. It may be the case with some of the US-based banks that operate in India and a few large private banks”.

In recent months big companies such as Infosys moved their deposits from private and foreign banks to public sector banks, largely because the state-owned players were offering higher interest rates. While in December, the public sector players had taken decision to reduce bulk deposit and focus more on current account and saving account balances.

While on lending side, bankers, notified that as overseas funding sources were drying up therefore companies were finding difficulty in accessing money from the equity markets, the demand has shifted to the domestic arena.

Likewise, as per the data public sector banks has seen a sharp increase in lending for the year up to January 2, 2009. However private and foreign banks have seen a drop in credit growth during the period.

Bank group-wise deposits and credit

In per cent

Jan 4, 08

Jan 2, 09

Deposits

Public sector banks

24.2

24.2

Foreign banks

34.1

12.1

Private sector banks

26.9

13.4

Commercial banks*

25.1

21.2

Credit

Public sector banks

19.8

28.6

Foreign banks

30.7

16.9

Private sector banks

24.2

11.8

Commercial banks*

21.4

24.0

* Includes regional rural banks (RRBs)

From the records on a y-o-y basis, the public sector banks, credit growth increased to 28.6 per cent in January 2009 from 19.8 per cent in January 2008, whereas, credit growth of private banks dipped 105.1 per cent from 24.2 per cent to 11.8 per cent in January 2009.

While the foreign banks, growth rate is on average partly due to the experience of their global parents.

On a year-on-year basis, the credit growth of foreign banks operating in India dipped from 30.7 per cent for the year up to January 2008 to 16.9 per cent in January 2009.

But in case of Indian private banks, the drop was steep as many of them, including the likes of ICICI Bank, the largest in the segment, are in an asset shrinking mode. A bank executive stated, “These banks are now consolidating their business to control non-performing assets (NPAs) and improve recoveries.”