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Plodding through on expected lines

Our quarterly deep dive into deposits shows deposit growth of 11% yoy, with private banks marginally ahead. Household deposits grew ~10% yoy. The quality of deposits still shows higher growth in term deposits (~15% yoy), with non-individual deposits growing marginally faster (15% yoy) than the individual (~10% yoy) share of deposits.

Key takeaways on deposit trends

The key takeaways on deposits: (1) Overall deposits grew 11% yoy, with private banks growing their deposits at 13% yoy and public banks at ~10% yoy (Exhibits 1 and 2). The market share split between public banks and private banks stood at ~60:35 (Exhibit 3). (2) Households dominate deposits at ~60% (Exhibit 4). (3) Public banks have ~70% share of their deposits coming from households, while that for private banks is at 55% (Exhibit 5). (4) There is a marginal shift in government deposits to private banks, while the share in corporate and household remains unchanged (Exhibit 6). (5) Private banks have ~85% of their deposits coming from metro/urban regions, while the same for public banks is 70% (exhibit 7). (6) The share of individual and non-individual deposits was unchanged at ~50% (Exhibit 8). Individual deposits are higher for public and the non-individual share is higher for private banks (Exhibits 9, 10 and 11).

CASA and term deposits: Term deposit growth still ahead of CASA

The key takeaways from CASA and term deposits: (1) Current account deposit grew 9% yoy and savings account deposits grew 5% yoy, while term deposits grew ~15% yoy; (2) savings deposits are a lot more diversified than current and term deposits (Exhibit 12); (3) CASA growth was weak in all regions, while term deposit growth was strong across regions (Exhibit 13); (4) household deposits’ shift to term deposits was higher (Exhibit 14); (5) term deposits saw higher growth in non-individuals over individuals across regions (Exhibit 15). The age profile shows better trends for the age profile >40 years (Exhibit 15); (6) public banks have lost market share in term deposits to private banks since 4QFY23 (Exhibit 20); (7) term deposits for private banks are largely from metro/urban regions (Exhibit 21); (8) individuals have a preference for Rs0.1-1.5 mn, while non-individuals are higher at >Rs10 mn ticket size (Exhibits 23, 24 and 25); (9) 65% of the overall deposits contracted are in the 1-3-year buckets (Exhibit 26); (10) repricing in the 7-8% interest rate bucket (Exhibits 29, 30 and 31) looks complete.

Growth is in a relatively tight band

We are working through familiar issues at hand where the slow growth in deposits for private banks has resulted in weak loan growth. Public banks are defending their share quite well, but they too have had to raise term deposit rates even if they do not need to mobilize them, given their CD ratios. LCR and NSFR guidelines give greater emphasis on the quality of deposits that banks need to mobilize, which implies that the near-term growth is likely to be at these levels. With a reversal of interest rates, lenders are facing an uncomfortable decision to cut deposit rates while looking to maintain NIM.

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