War for deposits: Banks’ biggest headache now coming for investors?
₹23.8 trillion, while that of State Bank of India (SBI) dipped 0.3% to stand at ₹49 trillion. “Most of the banks witnessed growth moderation along with some uptick in credit cost in Q1," Christy Mathai, fund manager—equity, Quantum AMC (Asset Management Company), told Mint. “Deposit mobilization remains the key focus for the banks and incrementally, the cost of deposits has moved higher than yield increases, impacting the net interest margins (NIMs).
Draft LCR norms, if implemented, will impact the liquidity further," he added. The Reserve Bank of India (RBI), last month, issued draft guidelines for management of liquidity coverage ratio or LCR. It refers to the proportion of high-quality liquid assets (HQLA) like cash and government securities that banks must hold to ensure they can meet their short-term obligations.
Under the new draft norms, banks will be required to increase the liquidity cover for ‘stable deposits’—those from which withdrawals are infrequent—from 5% to 10%. For ‘less stable deposits’, for example those held by customers with internet and mobile banking facilities, the required liquidity cover will rise from 10% to 15%. The draft guidelines, slated to be implemented from 1 April 2025, are anticipated to lower banks’ LCR by around 11-20 percentage points.
This, in turn, would necessitate banks shoring up deposits and increasing their HQLA holdings. However, Indian banks are already facing their worst deposit crunch in two decades, with even the regulator RBI expressing concern. As on 28 June, bank deposits had grown 11.1% year-on-year, lagging credit growth of 17.4%.
Read more on livemint.com
