State Bank of India has notched up nearly 60 per cent uptick in deposits so far this fiscal, partly because of the flight of savings from ponzi and bogus schemes, many of which went belly up in recent months, its chairman Pratip Chaudhuri has said.
Surprisingly, during the latter part of the past fiscal, the country's largest bank had witnessed a sharp fall in deposit accretion, just like other banks.
Chaudhuri described the development, which has its roots in one of the biggest tragedies to hit the investors, especially in the eastern states, as ‘flight to safety’.
"There is a flight to safety. In many parts of the country, many (ponzi and bogus) schemes are not able to redeem their deposits.
“So then SBI becomes a beneficiary," Chaudhuri said, adding that the eastern states are a fertile deposit collecting ground.
"Deposit growth is very strong, in fact we are surprised because our deposit rates are lowest in the industry. . .they have grown 1.5 times," he told PTI in an interview.
In absolute terms, the bank's deposit growth till now has been Rs 41,000 crore (Rs 410 billion) as against Rs 26,000 crore (Rs 260 billion) it had notched up in the same period last fiscal.
The bank had posted a 14.9 per cent rise in deposits in FY13, with the last two quarters witnessing headwinds, partly due to the bank's decision to test the market by lowering its offering.
In early April, West Bengal witnessed a string of suicides by depositors of ponzi schemes and chit funds
like Saradha chit fund, which duped lakhs of investors of thousands of crores, triggering a debate on the lack of regulatory gaze on such operators.
Chaudhuri attributed the rise in deposits to other initiatives of the bank like completing a drive to aircondition each of the bank's 14,800 branches, adequate staffing in the rural and semi-urban branches and also incentivising branch-level officials for netting deposits.
SBI had witnessed a drastic fall in deposit mobilisation in the third quarter of the past fiscal because of its decision to reduce the rate by 0.25 per cent.
It had to up the offering again to stay competitive.
The bank is sitting on an excess liquidity of up to Rs 50,000 crore (Rs 500 billion) at present, he said.
Asked if healthy deposit accretion this fiscal will help it reduce the deposit rate and bring down the lending rate, Chaudhuri said the bank cannot cut the offering as such a move would result in flight of deposits to the postal saving scheme.
Queried about the impact on margins, he said it is difficult to assess till the third and fourth quarter when the loan growth goes up. For now the bank is maintaining its guidance of 3.6 per cent on the domestic net interest margin, he said.
He said the bank's margins could have been much better but for its inability to meet the priority sector lending target for agriculture.
Over the last six years, nearly Rs 20,000 crore (Rs 200 billion) of the shortfall has been deposited in the low yielding Rural Infrastructure Development Fund, which fetches only 4.5 per cent return, Chaudhuri said, attributing the deficit to the slowdown in the farm sector.