The share of private sector banks in total deposits has risen to 34% as of December 2023, from 25% at the end of 2017-18, helped by aggressive interest rate offerings and an improved customer relationship management. The share of public sector banks in the space has declined to 59% from 66% at the end of the financial year 2017-18, according to the Reserve Bank of India data.
The ability of private banks to swiftly raise interest rates on fixed deposits has helped them increase their share in total deposits, say bankers.
“Given the asset growth of private sector banks being higher than the public sector banks, the need for deposits was also higher for the former. With their robust relationship models, private banks were quick to react to emerging deposit rush and adjusted rates to garner a higher share of fixed deposits,” Virat Diwanji, group president and head – consumer bank, Kotak Mahindra Bank, told FE. “Ease of transacting using mobile apps of private banks also facilitated smooth opening of fixed deposits.”
Private banks have a better strategy on interest rates, tenure and ease of execution to attract customers which resulted in higher fixed deposits, Diwanji said.
Not only have private lenders increased their share of total deposits, they have also raised deposits at a faster pace compared with public peers. Deposits of private banks grew by 135% to Rs 68.4 trillion as of December 2023, from Rs 29 trillion as of March 2018. Public sector banks increased their deposits by 40% to Rs 116.5 trillion as of December-end, from Rs 76.5 trillion as of March 2018.
Apart from offering higher rates on deposits, private lenders have ensured ease of doing banking transactions by leveraging technology, say bankers.
“Today most private banks have very efficient mobile banking apps. The user experience is much better, which allows customers to perform banking transactions faster and with ease,” said a senior official at a private bank. “This has helped private banks gain market share in metro cities and urban areas.”
Private banks’ focus on maintaining a better relationship with customers has also helped them raise deposits.
“The role of public sector banks cannot be ignored in financial inclusion. Public sector banks cater to a diverse set of customers in urban, semi-urban and rural areas,” said a senior official of a public sector bank. “However, there is a need for quick decision making.”