As on March 31, 2013, the total deposit base of the bank stood at R12,02,740 crore, while high cost bulk deposits stood a little over R12,000 crore. The ratio of bulk deposits as on March 31, 2012, stood at 5.56% of total deposits, this was worth about R58,000 crore.
Deposits worth over R1 crore are usually termed as high-cost bulk deposits, since they attract a higher interest rate. This is the lowest ratio of bulk deposits we ever had. Most are one-year deposits that we have shed. There were some three-year deposits too, but those were legacy accounts. We expect to take it to 0%, Chaudhuri said.
While SBI has the lowest proportion of bulk deposits, other public sector banks have also been trying to reduce these chunk and expensive deposits. Public sector peer Bank of India (BoI) has brought down its bulk deposit ratio from 13% as on March 31 to 11% of total deposits, at the end of May, chairperson and managing director VR Iyer had earlier told FE.
Public sector banks had been asked to reduce their dependence on high-cost deposits, bringing them down to 15% of total deposits at the earliest. However, most state-owned lenders are yet to achieve this target. Over FY13, Canara Bank managed to reduce bulk deposit and CD contribution to 25% from 45%. OBC saw a fall in bulk deposits from 26% to 20% and PNB saw its proportion of bulk deposits fall from 23% to 12.5%
While bringing down bulk deposits will help keep cost of funds in check to an extent, the SBI chief said the bank would not be able to bring down deposit rates below the current 8.75% on one-year deposits, since that will hit the bank badly. Chaudhuri said his bank had tried to reduce the interest rates in the October-December quarter, but had to come back to 8.75% since there was a significant flight of deposits.
The message we get from the market is that reducing deposit rates by 25 basis points (bps) is fine, but if we were to reduce it by 50 bps depositors will move away, he said.
At 8.75%, SBI offers one of the lowest interest rate on the one-year deposit scheme, among its peer banks. Only Punjab National Bank and Oriental Bank of Commerce offer similar rates.
Last month, a senior official from BoI had agreed that the bank had seen a flight of deposits worth R9,000 crore, within five weeks, after it had reduced interest rates on certain maturities, early April. The bank had to then rollback some of these decisions.