Though Late Government Banks Now have Understood Why to Avoid Bulk deposit

Banks may shed Rs 3 lakh cr in bulk deposits

As estimates are about the next few quarters, some banks start cutting their dependence on bulk money ( collected from Business Standard )

Abhijit Lele / Mumbai Aug 27, 2012, 00:06 IST With the government driving banks to reduce dependence on wholesale funds, public sector banks (PSBs) may shed bulk deposits worth Rs 3,00,000 crore ($55 billion) over the next few quarters, according to estimates of Deutsche Bank Securities. While banks had begun task (to prune bulk deposits) in earnest, the move was fraught with challenges, said public sector bank executives. First, the immediate replacement of bulk money with low-cost funds — current and savings account (Casa) deposits and term deposits is tough. Second, cutting down bulk money might moderate the pace of overall deposits’ mobilisation, a situation banking regulator may not be happy with.  In a report on Indian banking system, the global bank said, many state-owned banks had already started cutting their dependence on bulk deposits, but a significant amount was still pending and should be realised over the coming quarters, putting pressure on wholesale rates. SELECT BANKS BURDENED WITH BULK MONEY Bank Share of Casa deposits (in %*) Wholesale deposits (in %*) Bulk deposits to be shed (Rs cr) UCO Bank 22.3 43.0 43,000 PNB 35.3 22.0 27,200 Vijaya Bank 22.0 44.0 24,000 Canara Bank 24.3 22.0 22,900 OBC 24.1 28.0 19,600 Casa: Current and Savings account deposits; *As per cent of total deposits Source: Deutsche Bank Securities A top executive of Bangalore-based, Vijaya Bank, said the bank had already shed about Rs 6,000 crore of bulk money in the last three months. It was very difficult to cut down share of bulk deposits plus certificate of deposits to 20 per cent of overall deposits level by March 2013. Another official with a Mumbai-based bank said, much of bulk deposits were funds from public-sector firms and some information technology companies, seated on a big pile of cash. The share of these deposits grew significantly when banks were nudged to step up lending for big-ticket infrastructure projects. They had to resort to raising high-cost volatile bulk money, as it was difficult to raise amounts from retail route in short span. Deutsche Bank said it was practically not possible to shed such a big proportion. But if they were renewed, they would not be renewed at rates above retail deposit rates. Most high-cost deposits might get repriced around 150-200 basis points lower than FY12. Analysts said this move (fall in bulk deposits) would further moderate the deposit growth. The RBI data show annual deposit growth slowed to 14.3 per cent in August 2012, from 17.4 per cent in March 2012. A senior executive with a Kolkata-based public sector lender said though retail deposits were definitely less volatile, banks would have to continue to give attractive rates to get money. Plus, the change in profile of deposits composition is a gradual process. http://www.business-standard.com/india/news/banks-may-shed-rs-3-lakh-cr-in-bulk-deposits/484547/