Banks Face New Challenges with Changing Deposit Trends
The decline in fixed deposits and lower CASA balances are leading to a structural shift in deposit composition, posing long-term challenges for banks, according to Crisil. The trend reflects a growing preference for higher-yield capital market investments, impacting deposit stability and funding costs amid tight liquidity.
- Country:
- India
Banks are confronting a significant challenge as the composition of deposits undergoes a 'structural shift' due to a decrease in fixed deposits and lower shares of current and savings accounts (Casa) balances, Crisil reports. This transformation poses medium to long-term hurdles for banking institutions.
The preference for capital market investments, perceived as offering higher yields, appears to be influencing this shift. Household contributions to term deposits are decreasing, while non-financial corporations have increased their deposit base shares, creating a more rate-sensitive depositor environment.
According to Crisil, banks need to explore strategies to manage their deposit bases proactively. Declines in CASA deposits highlight a need for deposit management, as system liquidity is undergoing significant changes influenced by regulatory measures and Reserve Bank of India interventions.
(With inputs from agencies.)
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