More than two-thirds of banks see erosion in their low-cost deposits as customers chase higher yields
banks have seen an erosion in their low cost deposits as customers chase higher yields, and infrastructure demand is accelerating with the segment witnessing strong loans growth, showed a survey of bankers.
``Customers’ search for higher rates and the ability to lock those interest rates for a longer time has led to a shift in favour of term deposits,’’ said the FICCI-IBA Survey of Bankers. ``Term deposits have picked up pace. Around 70% respondents have reported a decrease in the share of CASA deposits in total deposits.’’
Some sectors like infrastructure, iron & steel and food processing are witnessing growth in long term credit demands. Major infrastructure development plans have been in place by the Government to facilitate quick capital spending with a strong multiplier effect and this is likely to spur demand for infrastructure financing, said the report.
``Infrastructure is witnessing an increase in credit flow with 82% of the respondents indicating an increase in long term loans as against 67% in the previous round. The survey suggests that the outlook for non-food industry credit over next six months is optimistic,’’ it said.
Bad loans on the other hand continue to show a positive trend as asset qualities improve. Bad loans showed a new decadal low to 3.2% as of September 2023, from 3.9% in March 23.
Majority of banks expect bad loans to be in the range of 3% to 3.5% over the next six months. “Some of the sectors that may continue to show NPAs over next six months include Textiles and garments, MSME,
