The slowdown in deposit growth has been dominating conversations of late. While the overall deposit mobilisation of scheduled commercial banks may be low, private sector banks, foreign banks and small finance banks have been doing well on this front. The headline number has however been dragged down by the weak performance of public sector banks.

Analysis of RBI data on deposits of scheduled commercial banks (including regional rural) from FY19 to FY24 showed that deposits grew at 13.4 per cent in FY24 compared to the previous year. This is higher than the 10.2 per cent growth in FY23, 10.1 per cent in FY22, 12.3 per cent in FY21 and 8.8 per cent in FY20. Deposits as of March 2024 stood at ₹212.5 lakh crore compared to ₹187.4 lakh crore as of March 2023.

While the overall numbers appear weak, granular data shows a different picture. In FY24, private sector banks, which hold 34 per cent share in overall SCB deposits, grew their deposit base at 20 per cent compared to 14.7 per cent year-on-year (y-o-y) growth in FY23. Foreign banks made large strides in deposits with 18 per cent y-o-y growth in FY24 compared to 2.2 per cent in FY23. Small finance banks, which hold just 1 per cent share, clocked 31.3 per cent growth in deposits in FY24. However, public sector banks, which hold the bulk of the deposits with 57 per cent share, grew deposits by just 9.4 per cent, a marginal rise from its FY23 growth.

“Private banks are able to grow their deposits better relative to public sector banks because of their aggressive deposit mobilisation efforts and also ability to undertake digital customer analytics and transmit the results from it to the front-end operations,” Vivek Iyer, partner, Grant Thornton Bharat, said.

SFB branch network

Crisil in a recent report noted that deposit growth in small finance banks in FY24 has even outpaced credit growth, in contrast to the overall banking sector. SFB branch network more than doubled in the five years till March 2024 to around 7,400, and they offer a premium of 50-250 basis points in interest rates over universal banks, even in the same category of deposits, the report added.

Jignesh Shial, Director, Research and Head of BFSI, InCred Capital, says private banks are on a branch expansion spree compared to consolidation at public banks. “As cooperative banks lose favour, SFBs are playing a key role. Some of the SFBs are even contemplating launch of much longer FD tenors to attract customers,” he added.

There is a meagre 0.6 per cent growth in number of PSU bank offices in FY24 compared to 8.1 per cent growth in private bank outlets, as per RBI data. Growth differences across bank categories are also due to variations in average ticket size of deposits mobilised, analysts said.

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