Money matters

Mumbai, April 28: The deregulation of interest rates on savings bank deposits may have helped some private lenders to expand their retail portfolio, but the entry of new players is likely to lead to a slowdown in growth.

Lenders such as Yes Bank have benefited hugely from the deregulation announced by the RBI in 2011.

The private sector lender, which once had one of the lowest CASA (current and savings account) ratios to total deposits, is witnessing a nearly 23 per cent jump in savings deposits on a quarter-on-quarter basis at a time the proportion of such low-cost deposits has grown to 19 per cent from 15 per cent in March 2012.

Yes Bank offers an interest rate of 6 per cent on savings deposits of up to Rs 1 lakh and 7 per cent on those above Rs 1 lakh.

IndusInd Bank offers 5.5 per cent for deposits of up to Rs 1 lakh and 6 per cent beyond that. The bank has seen its share of CASA deposits rising to 29.3 per cent from 27.3 per cent as of March 31, 2012 helped by a surge in savings deposits, which have grown to 13 per cent of total deposits (Rs 7,033 crore) from 11 per cent (Rs 4,694 crore) during the same period.

The lender, which plans to fund its growing consumer finance book through CASA, expects the share of these deposits to rise to over 35 per cent by the end of this fiscal.

Analysts said the strong growth in CASA deposits for Yes Bank and other mid-sized lenders might not be sustainable once the new licensees stepped in.

“Going forward, we expect the savings deposit accretion for Yes Bank to remain robust. However, the opportunity available for lenders such as Yes Bank to gain market share in savings deposits could get reduced from the levels envisaged earlier,” said Vaibhav Agrawal, vice-president (research) at Angel Broking.

The RBI had issued its final guidelines on the entry of new private banks in February and aspirants had been asked to submit their applications by July 1.

Though many large business groups and non-banking finance companies (NBFCs) are expected to throw their hat into the ring, it is speculated that the central bank may give the green signal to 5-10 entities by the end of this year or early next year.

Meanwhile, existing lenders are continuing with their expansion plan. Yes Bank increased its branches to 430 from 356 last year, while IndusInd Bank branches rose to 500 from 400 a year earlier. Some of the larger entities such as HDFC Bank and ICICI Bank have also boosted their presence.