Depositors Shift To Term Deposits, Positive Outlook on Digital Banking Units, Says FICCI-IBA Survey

The latest FICCI-IBA survey with banks indicate a growing preference for term deposits and a favourable response to digital banking units. Here are the other findings from the survey
Depositors Shift To Term Deposits, Positive Outlook on Digital Banking Units, Says FICCI-IBA Survey
Depositors Shift To Term Deposits, Positive Outlook on Digital Banking Units, Says FICCI-IBA Survey

Depositors at Indian banks have shown a shift towards term deposits, a survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Indian Banks’ Association (IBA) has revealed.

The survey, which was released on October 12, 2023, took responses from 24 banks representing 79 per cent of India’s banking industry.

Over half of respondent banks (57 per cent) reported a decrease in the share of current account and savings account (CASA) deposits in total deposits in the current round of survey.

“The term deposits have picked up pace as reported by the respondent banks,” FICCI said in a release highlighting the survey results. This trend also reflected a move by customers moving to term deposits that are offering higher rates of interest.

Notably, Reserve Bank of India (RBI) Governor Shaktikanta Das had last week said that the transmission of the 250 basis point (bps) rise in the policy repo rate since May 2022 has still not been done by banks yet. Further, as the festive season has arrived, banks may need more deposits to fund the increase in loan demand. More banks are hiking their term deposit rates, with Bank of Maharashtra and Bank of Baroda being the latest to do so.

Survey on Digital Banking Units (DBU)

The majority of banks stated that the customer response and visitor footfall at digital banking units (DBUs) has been encouraging, and the digital penetration among retail and corporate customers is also expanding. Small and medium-sized shops, which are proprietorship and partnership firms, found DBUs useful, the survey said.

DBUs are specialised banking hubs equipped with essential digital infrastructure, and offer a range of digital banking services. Here, one can either conduct banking through self-service or take assistance of the available staff to undertake the banking requirement. DBUs provide a spectrum of services, including account opening, ATM transactions, passbook printing, Internet banking at kiosks, fund transfers, Aadhaar updates, and even on-boarding for various schemes, such as Atal Pension Yojana and insurance products.

Another important service available at DBUs is the lodging of grievances with the bank and acknowledgement and tracking of resolution status through the digital mode.

Other Findings Of The Survey

The survey also revealed a sustained growth in long-term credit demand across sectors, such as infrastructure, textiles, chemicals, food processing, and metals. The infrastructure sector, in particular, has seen an increase in credit flow, with 67 per cent of respondents indicating higher long-term loans up from 57 per cent last year.

Credit standards for large enterprises have remained consistent for 54 per cent of the respondent banks, while 29 per cent reported a slight easing of credit standards, thus indicating improved funding conditions.

According to the survey, the asset quality has also improved, with 75 per cent of respondent banks reporting a reduction in non-performing assets (NPAs) over the last six months. As much as 90 per cent public sector banks and 80 per cent private sector banks have reported decrease in NPAs. Sectors with persistent high NPAs include infrastructure, textiles, food processing, metals, iron and steel, and engineering goods.

Almost 54 per cent of respondent banks said they expected gross NPAs to fall within the range of 3-4 per cent over the next six months.

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