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Branch expansion, micro-market focus, corporate salary accounts, home markets, focusing on non-resident Indians (NRIs) and business owners, and push for sweep accounts are some of the strategies adopted by banks to boost their deposit base as the gap between credit growth and deposit growth is expanding, Jefferies said in a research report.

Analysing the balance sheets of various banks for FY23, Jefferies said that banks are following divergent strategies to lift their deposit growth and not just depending on interest rate hikes.

According to Jefferies, HDFC Bank is focused on branch expansion; ICICI Bank on micro-market strategy in larger towns and slowing of selling life insurance policies; Axis Bank on corporate salary/Citi synergies; IndusInd Bank on home markets, NRI and business owners; Kotak Mahindra Bank on digital clients, and push for sweep accounts.

Some smaller banks have reduced their premium rates and as such banks aren’t relying on higher rates to mop up deposits.

“We feel private banks are in a better place to grow deposits than PSU (public sector undertaking) banks, as they are expanding branches and product offerings to drive growth,” Jefferies said.

“Loan-deposit ratio (LDR-domestic) is higher at 84-87 per cent for private banks, whereas it is lower for PSU banks at 64 per cent. While LDR indicates that PSU banks have higher liquidity to lend and Liquidity Coverage Ratios (LCRs) are in the upper range of 140-160 per cent, we are surprised by the rate hike by the PSU banks,” the report noted.

One of the trends that was seen was the shifting of low cost current account, savings account (CASA) deposits to term/fixed deposits, which are at higher cost for the banks, the report said.