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6 takeaways from RBI bank deposit data
Numbers without context may seem gibberish, but they often hide a great deal of interesting information. The Reserve Bank of India publishes many data regularly. One of the regular reports is about the current and savings account (CASA) deposits in India's banks.
Banks are an economy's backbone. Their financial performance is an important reflection on the state of the economy. Even the data on CASA deposits highlights few interesting trends.
Here are some interesting takeaways:
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Fast growth in savings, branches
Banks witnessed the fastest growth in terms of the number of savings accounts as well as branch expansion. In FY2013-14, the amount of savings bank accounts grew 19% from the previous year, while the number of bank branches jumped 11%. There are nearly a billion savings account customers today. This is good news for banks. Deposits are a cheap source of funds for banks, which they later give out as loans. The growth in branches was the fastest in the past decade, according to a Kotak Securities report.
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Rural trumps urban
A large part of the branch expansion took place in rural and semi-urban areas. Even in terms of growth in deposits, banks are seeing faster growth in these areas while growth slowed in urban markets. Deposits grew 17% in rural markets, 16% in semi-urban areas and by 15% in urban markets in comparison with the previous year. Even in the case of loans, banks witnessed over 20% growth in rural and semi-urban markets. Banks loaned only 14% more in urban markets in FY14. This shift in growth reflects the changing trends in the country. Rural and semi-urban areas are leading growth and development in the country. So, companies are also focussing on these markets.
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Private banks gain, PSUs lose share
Private banks grew at a faster pace in the past few years. Government-owned banks, in contrast, have not been performing well financially. This can also be seen in the CASA data. People increasingly preferred to save their money with private bank deposits. PSU banks, in fact, saw a fall in their deposits. State Bank of India (SBI) was the only PSU bank to hold onto its market share. That said, their overall share in the market is still very low. Savings account deposits with private banks account to only 18.4% of the total SA deposits. For current account deposits, their share is 28%.
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Productivity falls
Simple expansion in branches is not enough. Banks also need to see an increase in deposits per branch. This reflects the productivity in each branch. In FY14, banks saw a drop in productivity. This shows that while banks have expanded, they are yet to reap the benefits. "SBI, on the other hand, continues to report positive and balanced growth in this ratio in all markets," the Kotak Securities report said.
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CASA ratio falls
An important metric for banks is the CASA ratio-the amount of current account deposits compared with the amount of savings account deposits. Current accounts are opened by companies for their financial activities. A fall in CASA ratio shows that there are more savings deposits than current account deposits. CASA ratio fell for the fourth year in FY14. This shows that companies are still facing weakness in the country. "As there is gradual recovery in business activity, stronger balance sheets and improvement in working capital cycles, we expect some recovery in the share of current account balances from here on," the Kotak Securities report said.
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Individuals save more than companies
The share of individuals increased to 50% from 45% in FY2013, according to the Kotak Securities report. This is because companies face low growth in profits, high debts, and longer time to make and receive payments. As a result, they are unable to save more money in deposits. Individuals, in contrast, are increasingly opting for financial instruments to save money. This is because physical assets like gold and real estate have given poor returns in the recent years, the report said. This can also be seen in the fact that the customers increasingly prefer longer tenures for their deposits.
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80%
The rural and semi-urban areas may be leading in terms of growth for banks, but the urban market still holds a large share. In FY14, 80% of bank deposits were in the urban or metro markets. This has remained consistent over the last few years.
