55% of SBI's cash deposits came from beyond cities

SBI got Rs 1.93 lakh cr in cash deposits from November 10-25.

At least half or a bit more of the money people deposited after demonetisation in banks might be coming from rural and semi-urban India.

State Bank of India, the country’s largest lender, got Rs 1.93 lakh crore (Rs 1.9 trillion) from November 10 to November 25 in cash deposits. The exchange of old notes was Rs 7,905 crore and withdrawals Rs 51,829 crore, SBI said.

Senior SBI officials said the money deposited by customers from semi-urban regions and villages was 54-55% of the total. 

In city and metropolitan regions, a substantial number of people use electronic payment channels for transactions, SBI executives said.  

Another public sector lender, Union Bank of India, received about Rs 32,000 crore. “We have seen a similar pattern (as of SBI) of flow across the country,” said a top executive. 

After two weeks of hectic activity, the incremental rise in deposits is expected to moderate in the coming weeks. 

Bankers say 10-15% of the amounts that came in cash deposits are expected to stay in their kitty. People would take out money as the limits on withdrawals are gradually relaxed; some money would move to term deposits.

Income tax rules for high amounts deposited after scrapping of the legal tender status for Rs 500 and Rs 1,000 notes (on November 8) will also determine how much money stays with banks.   

This glut has created a huge liquidity surplus in the system when the demand for credit is weak and economic activity has dived due to the withdrawal of notes that backed transactions. 

SBI has cut the interest rate by 125-190 basis points on bulk term deposits, across maturities. This will predominantly impact business and institutions which place large amounts with banks.

SBI’s deposit base grew by 13.8% to Rs 18,58,999 crore by end-September. It has raised the forecast for deposit growth to 15-15.5%, from the earlier 13.5%. The share of bulk deposits in the total was about eight% at end-September.