Private banks have been more successful in attracting deposits compared to state-run lenders so far this fiscal, an IIFL Capital report has said on March 3.
Further analysis of the deposit mobilization data has shown that deposit growth of private banks remained in the range of 5-29 percent during the December quarter, as compared to 4-15 percent by PSU banks in Q3FY25.
“With private banks making inroads into semi-urban and rural (SURU) and weakening government business, their deposit/CASA growth is 1.7-2x of PSU banks,” said the report, quoting Rikin Shah, analyst with IIFL Capital.
Among private banks, IDFC First Bank registered a growth of over 29 percent on-year in deposits during Q3FY25, followed by 20-22 percent growth by CSB Bank, DCB Bank, and Bandhan Bank, according to data from ACE Equities.
Kotak Mahindra Bank, Karur Vysya Bank, HDFC Bank, and RBL Bank registered a deposit growth of over 15 percent on-year in Q3FY25.
On the other hand, state-owned lenders Punjab National Bank, Bank of India, Bank of Maharashtra, and Bank of Baroda reported a little over 10 percent growth in deposits during the quarter gone by.
A lower deposit growth this fiscal has meant that PSU banks have lost the deposit market share by 10-70 basis points (bps) on-year, the IIFL Capital report said.
State Bank of India and Axis Bank lost 20-75 bps of deposit market share on-year, while HDFC Bank and ICICI Bank gained 5-25 bps market share this fiscal, compared to a year ago.
SBI, Axis Bank and Kotak lost 7-65 bps of Current Account and Savings Account (CASA) market share on-year, while ICICI Bank gained the most at 49 bps, followed by HDFC Bank (7 bps) and Bank of Baroda (5 bps).
The IIFL Capital report said high government balance with RBI and LRS (Liberalised Remittance Scheme) outflows resulted in liquidity leakage rising to 5.5 percent of Net Demand Time Liability (NDTL). Despite recent easing measures by the central bank, the system liquidity is still in deficit, and hence the competition for deposit has not ebbed.
Banks have been struggling with slower deposit growth compared to credit growth over the past few months. The increase in gap between deposits and credit creates an asset-liability mismatch for lenders.
PSU banks had a better Credit to Deposit ratio than private banks in Q3FY25, showed the report, with PSU bank’s CD ratio ranging between 68-82 percent as compared to 73-97 percent for private banks.
HDFC Bank, Axis Bank, IDFC First Bank and Bandhan Bank had a CD ratio of over 90 percent in Q3FY25, highest among private lenders. The CD ratio for most other private banks was ranged between 82-89 percent.
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