Pvt banks see healthy low-cost deposit growth
Branch additions, digital push, customer retention help drive Casa-Business Standard
At a time when many public sector banks are struggling to attract low-cost deposits — despite having large branch presence — their private sector counterparts saw a healthy growth, on the back of branch expansion and product innovation. Private-sector lenders attributed customer satisfaction as one of the reasons for the growth in current account and savings account deposits (Casa), known as low-cost deposits.
ICICI Bank, the country’s largest private-sector lender, has managed to grow Casa at 16.2 per cent in the last financial year. Similarly, HDFC Bank’s savings growth also picked up steam and grew 17 per cent in the fourth quarter of FY14 compared to 7.4 per cent in the previous quarter. Current account deposits, too, expanded 26 per cent in the fourth quarter over the previous quarter.
“The bank continued to see a healthy momentum addition of Rs 13,482 crore to its savings account deposits and Rs 6,319 crore to its current account deposits, reflecting a year-on-year growth of 16.2 per cent in overall Casa deposits as of March 31, 2014. We're quite happy we could improve the Casa average basis from 38 per cent to 39 per cent. The focus would be to continue that approach and stabilise that number between the 38 per cent and 40 per cent level even as we grow the total balance sheet,” said N S Kannan, executive director of ICICI Bank, in an analyst conference call after the fourth quarter results.
ICICI Bank, the country’s largest private-sector lender, has managed to grow Casa at 16.2 per cent in the last financial year. Similarly, HDFC Bank’s savings growth also picked up steam and grew 17 per cent in the fourth quarter of FY14 compared to 7.4 per cent in the previous quarter. Current account deposits, too, expanded 26 per cent in the fourth quarter over the previous quarter.
“The bank continued to see a healthy momentum addition of Rs 13,482 crore to its savings account deposits and Rs 6,319 crore to its current account deposits, reflecting a year-on-year growth of 16.2 per cent in overall Casa deposits as of March 31, 2014. We're quite happy we could improve the Casa average basis from 38 per cent to 39 per cent. The focus would be to continue that approach and stabilise that number between the 38 per cent and 40 per cent level even as we grow the total balance sheet,” said N S Kannan, executive director of ICICI Bank, in an analyst conference call after the fourth quarter results.
According to bankers, apart from branch additions and improving distribution network, it is the quality of consumer service that has enabled banks to wrest market share from other public sector banks. Moreover, the growth has happened irrespective of the fact that several lenders have not increased savings account interest rate, despite it being deregulated a few years ago. Barring a few private banks, all the major banks in the country offers four per cent on savings bank deposit.
Federal Bank, which has maintained the savings rate at 4 per cent, has grown its Casa by 33.82 per cent as of end-March, compared to 33.47 per cent in December, 2013.
Shyam Srinivasan, chief executive and managing director of Federal Bank, explains that high interest rate on savings account in itself is not a big crowd puller. “One or two per cent high rate on savings account does not make much of a difference. This is because people typically don’t keep too much money in their savings account and as a result the difference is negligible.”
He added that instead of rates, consumers give more preference to factors such as convenience and services.
Sumant Kathpalia, head (consumer banking) at IndusInd Bank, also believes that innovative products with differentiated focus has allowed the banks to improve its savings account share. “For mid-sized banks like us, it is very important to ensure that you offer something to your consumer that no one else is offering and that is the way you can gain market share.”
He added that the bank believes in rolling out a unique product or service, every six months, that no one else has in the market.
Apart from providing better services, banks have also been wooing consumers with better offers on debit cards and net banking spends. Bankers agree that in order to get the youth to notice them in a competitive market like this, they need to dole out more offers on savings bank account-related services like debit card, net banking, etc. Lenders agree this is being used as a differentiator in a competitive market.
Moreover, banks have also been focusing on the digital medium to target the youth consumers. ICICI Bank and Kotak Mahindra Bank have also allowed consumers to open bank accounts or transact via using their social media accounts in order to tap the new-age consumers.
Rana Kapoor, managing director and CEO of Yes Bank, believes that apart from offering quality service, exercises that help the bank connect with youth such as sport or social media have also been effective tools in connecting with new consumers. The lender, which offers seven per cent interest for savings bank deposits of Rs 1 lakh and above and six per cent for less than Rs 1 lakh, recorded a 28.8 per cent growth in savings account in FY14.
So far as current account is concerned, banks are working on improving the relationship with the corporate clients to grow the volumes.
Federal Bank, which has maintained the savings rate at 4 per cent, has grown its Casa by 33.82 per cent as of end-March, compared to 33.47 per cent in December, 2013.
Shyam Srinivasan, chief executive and managing director of Federal Bank, explains that high interest rate on savings account in itself is not a big crowd puller. “One or two per cent high rate on savings account does not make much of a difference. This is because people typically don’t keep too much money in their savings account and as a result the difference is negligible.”
He added that instead of rates, consumers give more preference to factors such as convenience and services.
Sumant Kathpalia, head (consumer banking) at IndusInd Bank, also believes that innovative products with differentiated focus has allowed the banks to improve its savings account share. “For mid-sized banks like us, it is very important to ensure that you offer something to your consumer that no one else is offering and that is the way you can gain market share.”
He added that the bank believes in rolling out a unique product or service, every six months, that no one else has in the market.
Apart from providing better services, banks have also been wooing consumers with better offers on debit cards and net banking spends. Bankers agree that in order to get the youth to notice them in a competitive market like this, they need to dole out more offers on savings bank account-related services like debit card, net banking, etc. Lenders agree this is being used as a differentiator in a competitive market.
Moreover, banks have also been focusing on the digital medium to target the youth consumers. ICICI Bank and Kotak Mahindra Bank have also allowed consumers to open bank accounts or transact via using their social media accounts in order to tap the new-age consumers.
Rana Kapoor, managing director and CEO of Yes Bank, believes that apart from offering quality service, exercises that help the bank connect with youth such as sport or social media have also been effective tools in connecting with new consumers. The lender, which offers seven per cent interest for savings bank deposits of Rs 1 lakh and above and six per cent for less than Rs 1 lakh, recorded a 28.8 per cent growth in savings account in FY14.
So far as current account is concerned, banks are working on improving the relationship with the corporate clients to grow the volumes.
http://www.business-standard.com/article/finance/pvt-banks-see-healthy-low-cost-deposit-growth-114050500953_1.html
Fin Min asks PSU banks to improve CASA level, focus on recovery
New Delhi: The Finance Ministry has asked public sector banks to step up efforts for mobilising low-cost CASA deposits and focus on recovery in a bid to improve their financial performance.
“Banks have been asked to cut down their reliance on bulk deposits. They need to focus on mobilising low-cost deposit. They should be focusing more on CASA (current account savings account),” Financial Services Secretary Gurdial Singh Sandhu told PTI.
They should be aiming at 40% CASA for improving their profitability, he said.
CASA is mobilised at a very low rate and subsequently deployed for lending at a much higher rate resulting in higher margin for banks.
All the public sector banks provide 4% per annum interest rate on savings account, while it is nil for current account deposits. So, the average cost of funds comes much lower than 4%. At the same time, base rate or minimum lending rate for most of the banks is above 10%.
On bad debt, all banks have been directed to step up efforts for loan recovery, he said, adding, banks should also pay attention to cutting overhead cost.
He also said banks need to accord top priority to cases of fraud and willful default and take legal action against those responsible.
“Cases of fraud have been detected in many banks. There is no difference in fraud and willful default as both are intentional in nature,” he said.
“So, banks have been asked to declare such cases as willful default and appropriate legal action should be initiated by banks,” he said.
Cases of fraud include providing wrong information, submission of fictitious documents and so on.
Sandhu said banks have to deal with all such cases firmly so that non-performing assets could be brought down.
“Banks have to make all out efforts for NPA recovery and reducing level of NPA and cost of funds. Government would be working very closely with banks,” he added.
Non-Performing Assets or bad loans of state-owned banks rose by 28.5% from Rs 1.83 lakh crore in March, 2013 to Rs 2.36 lakh crore in September last year.
Banks recovered Rs 18,933 crore worth of bad loans during the April-December period. They have been monitoring their top 30 bad loan accounts for quite some time now.
“Banks have been asked to cut down their reliance on bulk deposits. They need to focus on mobilising low-cost deposit. They should be focusing more on CASA (current account savings account),” Financial Services Secretary Gurdial Singh Sandhu told PTI.
They should be aiming at 40% CASA for improving their profitability, he said.
CASA is mobilised at a very low rate and subsequently deployed for lending at a much higher rate resulting in higher margin for banks.
All the public sector banks provide 4% per annum interest rate on savings account, while it is nil for current account deposits. So, the average cost of funds comes much lower than 4%. At the same time, base rate or minimum lending rate for most of the banks is above 10%.
On bad debt, all banks have been directed to step up efforts for loan recovery, he said, adding, banks should also pay attention to cutting overhead cost.
He also said banks need to accord top priority to cases of fraud and willful default and take legal action against those responsible.
“Cases of fraud have been detected in many banks. There is no difference in fraud and willful default as both are intentional in nature,” he said.
“So, banks have been asked to declare such cases as willful default and appropriate legal action should be initiated by banks,” he said.
Cases of fraud include providing wrong information, submission of fictitious documents and so on.
Sandhu said banks have to deal with all such cases firmly so that non-performing assets could be brought down.
“Banks have to make all out efforts for NPA recovery and reducing level of NPA and cost of funds. Government would be working very closely with banks,” he added.
Non-Performing Assets or bad loans of state-owned banks rose by 28.5% from Rs 1.83 lakh crore in March, 2013 to Rs 2.36 lakh crore in September last year.
Banks recovered Rs 18,933 crore worth of bad loans during the April-December period. They have been monitoring their top 30 bad loan accounts for quite some time now.
your blog is giving very useful knowledge for all, i'm sharing your information to all friends.Do you need cash loan against credit card?.Swipe Your Credit Card And have Immediate cash With Cheapest Costs. Provide Your ID Card Photo Copy As A Document Resistant.Kindly see my blog
ReplyDeletecash on credit card in chennai at low interest