Chart of the Day: Look who has come back with deposits for banks

Bank deposits have been receiving flak over their low returns especially in an environment of high inflation. The pandemic had forced Indians to save and these savings had found their way into bank deposits despite low returns as they are the safest and most liquid of assets. In FY22, the year of recovery from the pandemic’s blow, households seem to have throttled back on their deposits, perhaps partly a fallout of increased spending. Deposit growth from private non-financial companies has slowed, while that from the government has picked up.  On the other hand deposits from companies have grown sharply. Within private sector companies, deposits from financial companies such as mutual funds, pension funds and non-bank lenders have surged. As the chart above shows, deposits from them rose 27.3 percent in FY22 after growing by a modest 15 percent in the previous years. Part of this is also due to low credit growth and hence the surge could be temporary. That said, finance companies have a small share in deposits, at a little over 5 percent. The fact remains that Indian households still form a lion’s share in bank deposits, at over 60 percent. The sustenance of bank deposit growth depends on how households continue with their holdings.