Challenges in deposit mobilisation persisted in the fourth quarter of financial year 2024-25, with 12 out of 22 banks reporting a year-on-year decline in deposit growth based on provisional figures.
A Moneycontrol analysis of the banks which reported their provisional numbers showed that Bank of Maharashtra, Indian Bank, Punjab & Sind Bank, IndusInd Bank, and YES Bank, among others, saw a year-on-year decline in deposit growth.
IDFC First Bank, IndusInd Bank, RBL Bank, Bank of Baroda, Bank of India, and Punjab National Bank, among others, reported a quarterly drop in deposit growth.
Sanjay Agarwal, Senior Director, CareEdge Ratings, said the reduction in deposit growth is because banks refrained from offering higher rates on bulk deposits to protect their net interest margins (NIMs) and on expectations of a rate cut by the Reserve Bank of India (RBI).
Rate cut push
During the January-March quarter, the RBI cut the repo rate by 25 basis points in the February monetary policy, which the banks had anticipated, to support growth.
The rate cut was a key reason banks did not replace maturing deposits with higher deposit rates, instead offered lower rates, sacrificing deposit growth. Also, there are expectations of further rate cuts by the RBI amid concerns over global uncertainties.
Following the rate cut by RBI in April, large banks including State Bank of India, Bank of India, HDFC Bank and Yes Bank reduced their fixed deposit interest rates.
Reliance on CDs
Another analyst noted that the decline in deposit growth remains marginal because most banks raised funds through certificates of deposits (CD) in the last quarter to tide over tight liquidity.
Banks stepped up CD issuances in financial year 2024-25, which ended March 31, to mop up deposits and meet funding requirements in a tight liquidity environment.
Of the Rs 1.15 lakh crore worth of CDs issued in FY25, around 62 percent were by state-owned banks, Clearing Corporation of India (CCIL) data shows. Private lenders accounted for 29 percent of the issued CDs.
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