“During 2020-21 so far, deposits with PSBs grew at a higher pace than usual, partly reflecting perception of their safe-haven status,” RBI said in its report on Trend & Progress of Banking in India.The rise in money parked in Prime Minister Jan Dhan Yojana accounts also contributed to the trend. The total number of accounts opened under PMJDY reached 41.4 crore, with 1.30 lakh crore of deposits as on December 2, 2020. Of this, more than 60% are with public sector banks.
As per the latest available data till December 4, bank deposits grew by 11.3%, as against 10.3% in the year-ago period. Credit growth for the same period was 5.7% as against 7.9% a year ago.
“The liquidity surplus can be ascribed to deposit growth outpacing credit growth persistently,” CARE Ratings said in a report. As on December 4, the liquidity surplus in the banking system stood at 5.8 lakh crore.
The share of bank deposits and borrowings in the maturity bucket of up to one year has fallen, narrowing the asset-liability mismatch in the shorter-end of the term.
“In an environment of declining interest rates during 2019-20, the negative gap in the maturity bucket of up to one year and positive gap in higher maturity buckets moderated. While liabilities like deposits and borrowings in the maturity bucket of up to one year declined, assets – specifically, investments – picked up,” RBI said.
Subdued credit growth and relatively robust deposit growth for most part of the year resulted in a decline in borrowing requirements of banks, except for private sector banks, the regulator said.
Cost of deposits for public sector banks fell to 4.96% in FY20 from 5.01% in FY19 while it rose for private banks to 5.26% from 5.14% over the same period.