With deposit growth still sluggish and the Reserve Bank of India expressing concern over the widening gap between deposits and credit growth, banks have intensified efforts to attract depositors. From leveraging their branch network to launching special fixed deposit schemes and offering debit and credit card rewards, banks are pulling out every strategy from their playbook to raise more deposits. As digital channels are already extensively used in the banking sector, lenders, especially public sector banks, have now turned their attention to leveraging their branch networks to boost deposits.
“Our branches in rural and semi-urban areas have footfalls of 100-400 customers per day but not all of them have accounts with us. We are focusing on tapping those customers who are visiting our branches but do not have account with us,” said an executive director of a large public sector bank. “Customers are also diverting funds to mutual funds and the stock market, we will persuade them not to put all eggs in one basket, diversify their investments and keep a part for their funds in fixed deposits,” he added.
Digital channels allow banks to reach higher number of customers but not enough volumes, say bankers. Digitally opened bank accounts tend to bring in significantly lower funds for banks initially compared to savings accounts opened by customers who either visit the branch in person or receive assistance from a bank’s representative.
“Digital channels help banks to reach customers quickly but such accounts usually have one-tenth of funds initially compared to accounts opened with the help of a bank representative. Personal interaction instils trust in customers, encouraging them to park larger funds with the bank,” said a senior official of a private bank.
Banks are attracting new customers by giving reward points, cash-back offers debit and credit cards and incentives to do transactions from their UPI-linked accounts. “A customer may have an account in multiple banks, but he keeps more funds in his primary account from which he does UPI transactions, fund transfers, and bill payments. By offering reward points and cashback on debit and credit cards, lenders encourage customers to use their bank accounts as their primary accounts,” said a senior official of a private bank.
Deposits are growing slower than credit, posing a challenge for the banks to mobilise low-cost deposits. Banks credit grew by 17.3% to reach Rs 168.8 trillion for the fortnight ending June 28, 2024, while deposits increased by 11.1% to 212.9 trillion, as per the Reserve Bank of India data.
Banks are reluctant to raise interest rates on fixed deposits with longer durations, as they expect interest rate cuts to begin later this year. Instead of increasing rates on long-term fixed deposits, they are launching special fixed deposit schemes that offer higher interest rates to customers
“Banks would not like to raise interest rates on fixed deposits across the board as the Reserve Bank of India is expected to cut repo rate this year. Special tenure fixed deposit schemes can play in crucial role in mobilising deposits. Such schemes can be assigned specific themes or names to catch the attention of depositors,” said the treasury head of a public sector bank.
Several banks, including State Bank of India, Bank of Baroda, Bank of Maharashtra, and others, have launched fixed deposits with tenures of 444 days, 333 days, 200 days, and similar fixed durations.