Public sector banks on a drive to boost deposits

New Delhi, Nov 22 | Updated: Nov 23 2005, 05:48am hrs
Public sector banks have embarked on a special mobilisation drive to boost deposits. As part of the drive, Bank of Baroda added as many as 12 lakh new savings accounts with a total deposit of Rs 640 crore in October, according to official sources.

Other banks, like the State Bank of India, Punjab National Bank and Bank of India have also drawn up plans on similar lines to mobilise deposits, while keeping the costs low.

The moves are in keeping with the finance minister P Chidambarams recent statement that banks should devise concrete strategies to increase deposits.

While bank lendings have grown by 14.6%, deposits have seen a 12.3% growth.

This may cause a disbalance for banks, which have seen a huge boom in credit, sources added.

Most banks are targeting people in the semi urban and rural markets who have no savings accounts for the exercise. In addition, the banks are also looking at increasing deposits with their existing account holders.

Banks have also resorted to house to house canvassing to increase their deposits, a senior government official said. Though the government has not set any growth targets for deposits, it is keeping a close watch on the banks.

Earlier, the finance minister had indicated that the banks would require about Rs 60,000 crore in the next five years to sustain the growth rate in the banking sector.

Senior bankers pointed out that the additional capital is required to sustain the pace of the current credit boom.

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Most banks are targeting people in semi-urban and rural markets who have no savings accounts
Banks are also looking at increasing deposits with their existing account holders
Additional capital is required to sustain the pace of the current credit boom

Banks may face a capital crunch in the next couple of years, in case credit growth continues at the current pace. We, therefore, want to take prior steps to avoid any disruption in the system. One of which is to focus on increasing deposits, a source said.

That apart, banks are awaiting the Reserve Bank of India guideline on tier I, II and III norms of raising capital. The final guideline is likely to come in the next couple of weeks.