As inflation cuts into savings and banks refuse to raise interest rates on savings accounts, clients are shifting from savers to investors. This has prompted banks to rethink their tactics.
"The saver-to-investor trend has grown significantly since the elections. That is why you are seeing pressure on savings accounts as assets flow into mutual funds, SIPs, and even term deposits," said Shanti Ekambaram, Kotak Bank's deputy MD.
Since March 2020, the percentage of deposits in savings accounts has fallen from 32.8% to 31.2%, while the number of current accounts has remained stable at roughly 9.5%. Term deposits now account for 59%, up from 57.8% previously. Most savings accounts are giving negative returns after accounting for inflation (5%), but no bank is planning to raise interest rates.
Kotak Bank's MD and CEO, Ashok Vaswani, stated on an analyst call that the bank sees itself as a holding company for other businesses, gaining value from money that goes from the bank to capital markets or insurance.
To increase its deposit base, the bank plans to reinforce its franchise by making savings accounts easier to create and combining offers for important categories. It reintroduced a program that transfers funds from savings and current accounts to term deposits and implemented a micro-market approach to expand the deposit base.
HDFC Bank's aim is to rapidly expand its branch network and customer base while strengthening relationships with current clients. The bank's current focus is on granular retail deposits, which are the individual sums held in client accounts.
"We want the branches to drive granular deposit growth and not look for non-retail or large ticket deposits," said Srinivasan Vaidyanathan, CFO of HDFC Bank. He noted that fixed deposits were the 'star' of resource mobilization, increasing by Rs 44,300 crore, or 24%, over the previous year.
Since January of last year, Yes Bank has added 140 branches. This year, it wants to open 30-50 more branches. According to Rajan Pental, the bank's head of retail, there has been a little increase in the cost of new deposits, but it is not significant.
"The customer needs money for transactions, investment, for spending which has to come through the banking channel, which we are in a position to augment and make them do transactions through RBL Bank with our differentiated service and interest rate," said R Subramaniakumar, RBL Bank's Managing Director and CEO.
