MUMBAI: The massive fortnightly spike in bank deposits by a whopping Rs 3.3 lakh crore -- the fifth biggest rise in 24 years -- for the fortnight to November 5, 2021, and a subsequent plunge of Rs 2.7 lakh crore in the next fortnight can be due to the expected IPO boom and subsequent poor show in the later weeks, argues an SBI Research report.
Such a massive deposit accretion has never happened during a Diwali week as there is always a currency leakage and concomitant deposit decline, says an SBI Research report, adding this is also the fifth largest increase in any fortnight in the past 24 years since 1997 and the Rs 2.69 lakh crore subsequent deposit slump for the fortnight to November 19 is the largest since 1997.
Such a huge incremental addition has happened only a few times: during the fortnight to November 25, 2016 by Rs 4.16 lakh crore after the note ban, for the fortnight to September 26, 2016 by Rs 3.55 lakh crore, March 29 2019 by Rs 3.46 lakh crore and April 1, 2016 by Rs 3.41 lakh crore, said the report.
While November 2016 was due to the demonetisation and the March and April of the same year could be attributed to seasonal year-end bulge, Soumya Kanti Ghosh, the chief economic adviser to the State Bank Group, said in a note on Friday.
According to the provisional RBI data for the fortnight to November 19, the aggregate deposits of commercial banks have slumped by Rs 2.7 lakh crore.
The slump in deposits follows an abrupt increase by Rs 3.3 lakh crore in the previous fortnight ending November 5, 2021-- this was 36 per cent of the incremental deposit growth for the period to Rs 9.35 lakh crore.
In fact, the Rs 3.3 lakh crore fortnightly deposit bulge is the fifth largest fortnightly increase since 1997 and the Rs 2.69 lakh crore subsequent deposit slump (fortnight ended Nov'19) is the largest since 1997.
Such an increase in deposits and subsequent slump is quite a contrarian trend, he said, adding while it is difficult to decipher the increase and subsequent decline, it does poses questions on liquidity management/financial stability or a shift in behavioural trend in customer payment habits through digitisation and hence lower currency leakage and concomitant deposit bulge or both.
On the fortnightly deposit slump in the subsequent days period, Ghosh said, "It was possible that there was a large influx of deposits into banking system for the fortnight to November 5, 2021 in anticipation of a build up in rally in stock markets post-primary issuances of new age companies and others. However, when such a rally did not materialise, deposits slumped and almost 80 per cent of incremental deposit was withdrawn."
"Interestingly, the money parked in fixed reverse repo window jumped from Rs 0.45 lakh crore on October 19 to Rs 2.4 lakh crore on November 19, and has remained at such level till December 1, 2021," he said, adding it must however be noted that the significant jump in digital transactions has also resulted in lower usage of cash in current fiscal and ideally could also have resulted in surge in deposits for the Diwali week.
Meanwhile, if quarterly banking deposit data show that though deposits growth remained same in Q2 at 2.6 per cent over 2.5 per cent in Q1, sequentially at the national level, apart from the metro regions, deposits growth has decelerated in Q2 over Q1, especially in rural areas, indicating that the current economic recovery is mostly urban led and rural economy is still recouping, it said.
But at the same time bank credit has risen Rs 1.18 lakh crore or 7.1 per cent on-year during the fortnight to November 5, may be due to festive demands and then declined by Rs 1,157 crore during the fortnight to November 19, the report added.
On the possible reason of the IPO rush, Ghosh noted the massive influx of new investors that began since the lockdowns began in March 2020 and which got accelerated in the past few months even as bank deposits have decelerated.
According to NSE data, monthly investor registrations rose to record-high levels in September 2021 to the tune of 15.6 lakh. Almost 50 lakh additional new investors have been registered with brokerages between April and September 2021 over the same period in 2020.
If deposits and credit grew by Rs 5 lakh crore during the rest of the FY22 (from November 19, 2021 to Mar 25, 2022), then the deposits growth will be around 12 per cent and credit growth around 8.5 per cent in 2021-22.