HYDERABAD: Notwithstanding high real interest rates in fiscal year 2018, term deposits of banks continued to slump registering a dismal growth of 4.7 per cent last year. According to the Reserve Bank of India’s Handbook of Statistics on the Indian Economy 2018-19 released on Sunday, four out of the seven tenors saw a de-growth in deposits, which affected the overall term deposits growth in FY18 to Rs 65.9 lakh crore, marginally up from FY17 Rs 62.9 lakh crore.
The low single-digit growth of term deposits is a recent phenomenon witnessed during the past three years and despite attractive interest rates, deposit mobilization of banks has been far from the potential.
Prior to FY16, term deposits registered healthy double-digit growth of as high as 15 to 17 per cent.
“Typically, depositors choose based on interest rates, which explains the high traction in one-two year tenors,” Soumya Kanti Ghosh, group chief economic adviser, SBI told TNIE. The average interest rate on deposits for one to five years and above ranged between 6.25 and 6.75 per cent all through FY18.
Worryingly, with banks reducing rates, FY19 and FY20 deposit growth will likely see fresh lows, according to experts.
Of all the tenors, one-two years and deposits of five years and above, comprise a lion’s share of overall term deposits and continued to grow at 16 and six per cent respectively in FY18.
However, short-term deposits of six-12 months, which account for 12 per cent of total term deposits, plunged four per cent, while even shorter tenors comprising 11 per cent fell an average 10 per cent in FY18.
Overall, term and demand deposits registered a growth of 10 per cent in FY19 at Rs 125 lakh crore.