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<div type="image" title="Are Indians depositing less money in banks, or more in mutual funds? Turns out, it&amp;#39;s neither of those." msid="113663806" hostid="261" sizebytes="1121785"></div> Over the past few months, there’s been a lot of brouhaha about the lagging pace of <keyword id="20202062" type="General" weightage="20" keywordseo="bank-deposits" source="keywords">bank deposits</keyword> in India. Simply put, the rate at which Indians are depositing their hard-earned money in banks has been falling constantly, and some blame the increasing financialisation of <keyword id="20751315" type="General" weightage="20" keywordseo="household-savings" source="keywords">household savings</keyword> in the country or the rising preference of Indians towards <keyword id="19929240" type="General" weightage="20" keywordseo="mutual-funds" source="keywords">mutual funds</keyword> and shares. So, the hypothesis is that people are choosing to invest more in mutual funds and the Indian <keyword id="19949641" type="General" weightage="20" keywordseo="equity-markets" source="keywords">equity markets</keyword> through direct investments, IPOs, or NFOs, the money flowing into Indian banks in the form of deposits is slowing down. But is that really the case? <h2>A crisis or a phase?</h2><keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords" meta.keywordsubtype="org" meta.entityname="RBI" meta.hostid="261" meta.entityid="RBI">RBI</keyword> data suggested that for the quarter ended June 2024, bank deposits grew at 11.7%. On the other hand, credit growth has outpaced this at 15%. This means that the outflow from banks as loans is far greater than the inflow into them in the form of deposits in Q1 of FY 2024-25. The situation largely saw cut-copy-paste in the first week of September as well, with loans registering a 13.3% YoY growth during the period, while deposits rose only 11.1%. This gap has only been widening for the last 3 years. Since deposits are how banks gather assets to further lend and earn interest income as a consequence, even a slight dip could set the alarm bells ringing for banks, and rightfully so. And truth be told, mutual funds are indeed taking on bank deposits in a big way. Per a report by Franklin Templeton, in August 2024, the AUM (assets under management) of Indian mutual funds, or the total funds managed by them, stood at 31.3% of total bank deposits in the country, up from 24.20% during the year-ago period. As of August 2024, the AUM of mutual funds stood at Rs 66.17 lakh crore, an all-time high. But all said and done, is this really the reason why the rate of bank deposits is falling behind? SBI has dismissed this to be a “statistical myth”, and experts point out that since equity and fund houses also keep the cash in their respective bank accounts, there’s no cause for concern. So, is financialization really to be blamed for the trailing tempo of deposits? Or is something else happening behind the scenes? We take a closer look: <h2>First, are household deposits really slowing down? And is that a cause of concern?</h2>Data from Motilal Oswal suggests the contrary. Deposits grew by around 10.4% between March 2020 and August 2024. Data from RBI also highlights that as of August 9, 2024, bank deposits witnessed a YoY growth of 10.8%. The loan-to-deposit ratio for the retail segment, which indicates what percentage of its total deposits the banks lend out as loans, has stayed at 77.5%, above the 77% mark for the tenth straight month. <div type="image" title="Yes, household deposits (as % of total deposits) have dipped, but the drop is far from significant" msid="113663882" hostid="261" sizebytes="306706"></div> Also, we can’t forego the fact that the share of Indian households in bank deposits has indeed slowed down. However, data from Axis AMC shows that the dip is marginal—from 63% in 2022 to 62% in 2023 and 61% in 2024. What has slowed down even more considerably is the share of government deposits in the aggregate bank deposits, which has dipped from 14% in 2018 to 9% in 2024. So, it's not just household deposits, you see. Moreover, as of March 2024, the collective CASA ratio (current and <keyword id="114757" type="General" weightage="20" keywordseo="savings-account" source="Orion">savings account</keyword> deposits) of all commercial banks in India stood at 41.00%, down from 43.1% in March 2023 and 45.2% in March 2022, marking a nearly 5% point decline over the past year, while still staying over the 10-year average of 39.2%. This implies that Indian banks are relying more on higher-cost funds (savings accounts), which can limit their profitability. <h2>What is this financialisation of savings we are talking about?</h2>Then again, there is no doubt about the growing affinity of Indians towards mutual funds and stock markets. Recent data from CBDT (Central Board of Direct Taxes) highlights that India’s net direct tax collection surged by around 22%, driven exclusively by the significant uptick in the collection of Securities Transaction Tax (STT), which doubled to Rs 26,154 crore, from Rs 13,352 crore in the year-ago period. Why does this matter? STT is levied when you buy or sell equity shares on stock exchanges, sell <keyword id="6361918" type="General" weightage="20" keywordseo="equity-mutual-funds" source="Orion">equity mutual funds</keyword>, and trade in futures and options in the equity segment. Such taxes, including the multiple other taxes in equity market investments, are considered as leakages as the money moves out of the economy into government coffers. Data from a ValueQuest report explains that over the last 20 years, the markets have handsomely rewarded the investors, generating over $900 billion in incremental value for them. This is the major driver behind the dramatic rise in investment flowing towards the equity markets. There’s further proof of this budding romance, if you check the demat pudding. The number of demat accounts, which are a primary requisite for participating in the stock markets, also burgeoned by 42.3 lakh in August 2024, taking India’s total tally of demat accounts beyond 17 crore. To put this in perspective, this is almost equivalent to the population of just 8 nations in the world, including China, the US, Brazil and more. Vivek Iyer, Partner, Grant Thornton Bharat thinks it's rather important, as well. “Financialisation of household savings in India is an indication of deepening capital markets in the market, especially from a retail investor standpoint. Bank deposits with a modest rate of return are no longer the only option for savings for investors. Investors today have more avenues for wealth creation in the form of public capital markets, which have democratized wealth creation and provided equality of opportunity to retail investors”, he says. Yes, Indians are investing more and more in the markets, and in mutual funds. But is it a sin to look out for inflation-beating returns, which the stock markets offer, and vanilla bank deposits don't? After all, the allure of 12-13% annual returns offered by <keyword id="45369" type="General" weightage="20" keywordseo="equities" source="Orion">equities</keyword> can certainly pale the stability offered by good old deposits, which generally do not go beyond 9% when it comes to annual returns. But all of this is not what is behind the slowdown. India is still a toddler in the school of savings financialization, with less than 10% of the population holding a demat account, and less than 5% of us saving in equities. That's a drop in the ocean of deposits, far inadequate to trigger a tsunami. <h2>Tell me why lagging deposits have nothing to do with Indians investing more in mutual funds!</h2>Says Shweta Rajani, Head - Mutual Funds, Anand Rathi Wealth Limited, “Households' equity holdings composition grew from 11.1% in FY 23 to 14.7% in FY 24. This trend reflects a growing awareness of investment options, empowering individuals to take control of their financial futures. Despite this transition towards equities, banks still hold a significant share of household financial savings—33.5% in FY24 compared to 34.9% in FY23”. Also, household savings and their subsequent financialization do not have much to do with deposit creation, which is entirely made by banks. What actually drives increased deposits is credit growth or increased lending. When interest rates are eased, people tend to borrow more and spend more, which circulates more money in the economy. For the past 4 years, RBI has been tightening the screws on interest rates, which raises the cost of borrowings, and makes it more expensive to take loans, putting a dampener on credit growth, but effectively curbing inflationary pressures. The last time RBI cut the repo rate by 40 basis points was back in May 2020, 4 years ago. The lag in <keyword id="19998084" type="General" weightage="100" keywordseo="deposit-growth" source="keywords">deposit growth</keyword> we’re witnessing is almost 3 years old. Coincidence much, or just good old economics at work? But with the Fed recently setting a rate cut precedent by slashing 50 bps off its interest rate, RBI is expected to follow suit in the next MPC (Monetary Policy Committee) meeting, scheduled for November 2024. A rate cut would ease the aforementioned high cost of borrowing, and increase loan-taking for corporates and institutional investors, thereby stoking consumption in the economy. And then, deposit creation in banks is likely to return to its former glory. If not, then that would be a curious case to unravel! But that worry is for another day. Do you have insights or personal experience to share on your personal finances or money? Contact us at <a target="_blank" class="c-link" href="mailto:businessinsider@timesinternet.in">businessinsider@timesinternet.in</a>.

Simply Put: A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

<ul class="summary-list"><li>Big banks have reported their second-quarter earnings over the past week.</li><li>JPMorgan's profits surged to a record high after it bought First Republic.</li></ul>Big banks have released their earnings over the past few days – and it's clear that Wall Street had a good quarter.JPMorgan's <a href="https://www.businessinsider.com/first-republic-bank-taken-jpmorgan-fdic-fails-find-buyer-2023-5">rescue of First Republic</a> helped its profits surge 67% to a record $14.5 billion for the three months to June 30.Bank of America, Citi, Morgan Stanley, and Wells Fargo also all beat analysts' earnings expectations, with each enjoying a share-price bump that's lifted the benchmark <a href="https://markets.businessinsider.com/etfs/invesco-kbw-bank-etf-us46138e6288">KBW Bank Index</a> by 4% over the past two trading days.Goldman Sachs' results <a href="https://www.ft.com/content/2294f66d-78b4-4e1c-91c1-2770995741ad" target="_blank" rel="noopener">on Wednesday</a> will provide a further gauge of the banking sector's overall health. Early signs suggest that Wall Street's emerged unscathed from the banking turmoil that rocked markets earlier this year.Back in March, Silicon Valley Bank collapsed after massive losses in its bond portfolio caused customers like Peter Thiel's Founders Fund to pull their deposits from the lender.That failure sparked wider concern, with First Republic collapsing the following month and other regional lenders such as PacWest and Western Alliance also seeing their share prices plummet.For big banks, the turmoil created an opportunity to win customers who were worried that their deposits weren't safe, and boost their balance sheets by scooping up smaller lenders.JPMorgan led the charge by <a href="https://www.fdic.gov/news/press-releases/2023/pr23034.html" target="_blank" rel="noopener">buying First Republic from the Federal Deposit Insurance Corporation</a> on May 1, taking on an additional $104 billion of deposits. CEO Jamie Dimon said at the time that the US Government asked banks including his <a href="https://www.businessinsider.com/jamie-dimon-jpmorgan-asked-step-up-with-first-republic-rescue-2023-5">"to step up, and we did."</a>That deal was one reason why JPMorgan posted record profits in the second quarter, analysts said.Wall Street's top names have also benefited from <a href="https://markets.businessinsider.com/news/stocks/stock-market-charts-crash-federal-reserve-interest-rates-bonds-crypto-2023-6?_gl=1*l0ilc7*_ga*MTg1NTcwOTk2MS4xNjg1NzE2MDQ0*_ga_E21CV80ZCZ*MTY4NjkwNDk1OS4yNi4xLjE2ODY5MDc4MTAuNjAuMC4w">the Federal Reserve's decision to raise interest rates from near-zero to more than 5%</a> over the past 16 months in a bid to tame soaring inflation.That benefits banks because they can charge customers more to borrow when they take out a mortgage or use a credit card.JPMorgan made almost $22 billion in net interest income in the second quarter, up 44% from the previous year.Bank of America, Citi, and Wells Fargo also all logged higher net interest income, thanks to the Fed's aggressive tightening campaign.

Yes, Wall Street's biggest lenders got even richer after Silicon Valley Bank collapsed

<ul><li>The Central government on Tuesday brought <keyword id="135860" type="COMPANY" weightage="20" keywordseo="Lakshmi-Vilas-Bank">Lakshmi Vilas Bank</keyword> under <keyword id="117489" type="PERSON" weightage="20" keywordseo="moratorium">moratorium</keyword> for 30 days, restricting deposit/withdrawal not exceeding ₹25,000.</li><li>The moratorium came into effect from 6 p.m. on Tuesday and will be in place up to December 16, 2020. </li></ul>Following an application submitted by the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (<keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword>), the Central government on Tuesday brought Lakshmi Vilas Bank under moratorium for 30 days, restricting deposit/withdrawal not exceeding Rs 25,000. The Centre issued the moratorium notification under Section 45 (2) of the Banking Regulation Act, 1949. The moratorium came into effect from 6 p.m. on Tuesday and will be in place up to December 16, 2020. The notification also stays the commencement or continuance of all actions and proceedings against Lakshmi Vilas Bank. During the period of moratorium, subject to the condition that such stay shall not in any manner prejudice the exercise by the Central government of its powers under Clause (b) of Sub-section (4) of Section 35 of the said Act or the exercise by the Reserve Bank of India of its powers under Section 38 of the said Act. As per the notification, Lakshmi Vilas shall not without the permission in writing of RBI: * Make payment to a depositor an aggregate sum exceeding Rs 25,000 lying to his credit in any kind of deposit including multiple deposit. * Wherever such depositor is having dues payable to the bank in any manner, either as a borrower or surety, the amount payable to such depositor shall be made after adjusting the relevant borrowal accounts. * Payment to bank creditor cannot exceed Rs 25,000, subject to following exceptions: (i) making of payment of amounts towards any drafts or pay orders issued by the Lakshmi Vilas Bank and remaining unpaid on the date on which the order of moratorium comes into force; (ii) paying the proceeds of the bills received for collection on or before the 17th day of November, 2020; (iii) making payment towards existing liabilities for call money or inter-bank borrowing (iv) trades effected prior to the date of moratorium for which settlement is yet to take place. * Grant any loans or advances or make investments in any credit instruments. According to the notification, the RBI may by a general or special order permit Lakshmi Vilas Bank to allow pay to its depositors an amount in excess of Rs 25,000 to meet unforeseen expenses towards (a) medical treatment of the depositor or any person actually dependent on him (b) towards the cost of higher education of the depositor or any person actually dependent on him for education in India or outside India; (c) to pay obligatory expenses in connection with marriage or other ceremonies of the depositor or his children or of any other person actually dependent upon him (d) in connection with any other unavoidable emergency if there is sufficient credit in his account. However, the sum such paid shall not exceed Rs 5 lakh or the actual balance lying to the credit of the account of such depositor, whichever is less. The Central government also directed Lakshmi Vilas Bank to pay for repaying loans or advances granted against government securities or other securities to it by the RBI or the State Bank of India or by any other bank and remaining unpaid on the date on which this order comes into force. Lakshmi Vilas Bank is permitted to operate its accounts with the RBI or with any other bank for the purpose of making the payments aforesaid. The bank may release or deliver goods or securities which have been pledged, hypothecated or mortgaged or otherwise charged to it against any loan, cash credit or overdraft: (i) In any case in which full payment towards all the amounts due from the borrower or borrowers, as the case may be, has been received by it, unconditionally. (ii) In any other case, to such an extent as may be necessary or possible, without reducing the proportions of the margins on the said goods or securities below the stipulated proportions or the proportions which were maintained before this Order came into force, whichever may be higher. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/urban-ladder-was-the-fourth-startup-from-vani-kola-kalaari-capital-portfolio-to-be-sold-to-reliance/articleshow/79264455.cms">Urban Ladder was the fourth startup from Kalaari Capital’s portfolio to be sold to Reliance – the investment firm’s MD is of the belief ‘selling does not mean sellout’</a><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/urban-ladder-was-the-fourth-startup-from-vani-kola-kalaari-capital-portfolio-to-be-sold-to-reliance/articleshow/79264455.cms"></a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/health/news/the-race-for-covid-19-vaccine-heres-how-moderna-pfizer-and-sputnik-v-vaccines-stack-up-against-each-other/articleshow/79263801.cms">The race for COVID-19 vaccine: Here’s how Moderna, Pfizer and Sputnik V vaccines stack up against each other</a><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/health/news/the-race-for-covid-19-vaccine-heres-how-moderna-pfizer-and-sputnik-v-vaccines-stack-up-against-each-other/articleshow/79263801.cms"></a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/thelife/personalities/news/billionaire-tesla-ceo-elon-musk-set-to-become-the-worlds-third-richest-person/articleshow/79261388.cms">Elon Musk gets richer by $15 billion on Tesla’s S&amp;P inclusion — set to become the world’s third-richest person, leapfrogging Mark Zuckerberg</a>

Lakshmi Vilas Bank under moratorium— RBI caps maximum deposit or withdrawal at ₹25,000

The <keyword id="6354335" type="COMPANY" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI) has asked state governments not to transfer their deposits out of private sector banks saying apprehensions about the safety of deposits in private lenders are highly misplaced. In a letter written to chief secretaries of all states, the central bank said moving deposits out of private sector banks could have implications for banking and financial sector stability. The letter came after reports suggested that some state governments have advised government bodies and other entities under their jurisdiction to transfer their funds held with private sector banks to public sector lenders. This follows the crisis at <keyword id="45660" type="COMPANY" weightage="20" keywordseo="Yes-Bank">Yes Bank</keyword> where the RBI has superseded the bank's board and placed restrictions on withdrawals. "We strongly believe that such a move can have banking and financial sector stability implications," the RBI wrote. "We feel that apprehension on the safety of deposits in private sector banks is highly misplaced and will not be in the interest of stability of the financial system in general and the banking system in particular." It requested state governments to reconsider any decision they might have taken in this regard or are in the process of taking such decision. "The Reserve Bank has adequate powers to regulate and supervise the private sector banks and by using these powers, it has ensured that the depositors' money is entirely safe," the letter said. The RBI said the resolution of weak private sector banks in the past has been done in a manner that the depositors are not put to loss. "It is precisely with a view to retaining depositors' confidence in private sector banks and mitigating their hardship that, after the imposition of a moratorium on <keyword id="436044" type="DOMAIN" weightage="20" keywordseo="Yes-Bank-Ltd">Yes Bank Ltd</keyword>, the RBI has drawn up a draft scheme without any delay and we are making every effort to expedite the finalisation of the scheme," it added.

RBI assures state governments that their deposits are safe in private banks

Bhubaneswar, Mar 6 () Devotees of <keyword id="8878020" type="PERSON" weightage="20" keywordseo="lord-jagannathand">Lord Jagannathand</keyword> priests at the centuries-old temple in Puri are worriedfollowing RBI restrictions on <keyword id="45660" type="COMPANY" weightage="20" keywordseo="Yes-Bank">Yes Bank</keyword> where Rs 545 crore isdeposited in the deity's name.The RBI has capped withdrawals from Yes Bank at Rs50,000 for the next one month and imposed strict limits onoperations after the cash-starved lender faced "regularoutflow of liquidity" following an effort to raise new capitalfailed. The RBI restrictions on Yes Bank have caused panicamong the devotees, said senior 'Daitapati' (servitor) BinayakDasmohaopatra. "We demand a thorough probe and action against thepersons responsible for depositing such a huge amount in aprivate bank for a little more interest," he said. "It is illegal as well as unethical to deposit thelord's funds in a private bank. Shree Jagannath TempleAdministration (SJTA) and the Temple's Managing Committeeshould be held responsible for the uncertainty," saidJagannath Sena convenor Priyadarshi Patnaik. He said a complaint was filed at a police station inPuri demanding probe over depositing the money in a privatebank, but no action was taken. Allaying concerns, Law Minister Pratap Jena said themoney is with the bank as fixed deposits and not in a savingsaccount. "The government has already decided to transfer thefunds from Yes Bank to a nationalised bank after tenures ofthe fixed deposits end this month," he said. Asked whether the government has taken up the matterwith the RBI, the minister said, "I have not talked to thebank authorities so far. I am sure, we will be able totransfer the money from Yes Bank without any problem." Former law minister and ex-Puri MLA Maheswar Mohantysaid it was not proper to keep the money with a private bankfor more interest. "The SJTA should immediately take up the matter withthe RBI and ensure that the money is safe," Mohanty said. The law minister last month told the assembly that ofthe lord's total Rs 626.44 crore, Rs 592 crore was kept inYes Bank. While Rs 545 crore was in the bank as fixeddeposits, the remaining Rs 47 crore was in a flexi account. The money kept in the flexi account has been withdrawnand the remaining Rs 545 crore will be transferred to anationalised bank in two phases after their maturities onMarch 16 and March 29, the minister had said. Congress MLA Suresh Routray sought a clarificationfrom the state government as to why it allowed the SJTA todeposit the lord's money in a private bank. "We will not tolerate improper utilisation of LordJagannath's money. The Congress will launch a statewideagitation demanding early recovery of the funds," he said. The BJP said the state government must take immediatesteps to recover the money. "Nobody including the government and the SJTA hasrights to meddle with the lord's funds," said BJP leaderBhrugu Buxipatra. AAMSOM SOM

Lord Jagannath of Puri has deposits worth Rs 545 crore in Yes Bank

New Delhi, Mar 19 () As banking services resuming fully at Yes Bank, administrator Prashant Kumar on Thursday once again assured depositors about the safety of their money and said there is ample liquidity with the bank. Kumar is the MD and CEO designate of the reconstructed Yes Bank. The banking services resumed at 6 pm on March 18, 2020, and customers were able to get full services by visiting the branches from March 19, 2020. "The bank has ample liquidity and there is no need to depend on external sources," Kumar said in a statement. Bank branches will open one hour earlier at 8.30 am from March 19 to 21, 2020, so as to serve the customers better. The bank has also extended banking hours across branches for its senior citizen customers, from March 19 to March 27, 2020 - 4.30 pm to 5.30 pm. "Yes Bank has taken adequate measures to restore banking services and ensured that the branches and ATMs have adequate supply of cash. However, there is no need to need for customers to rush for withdrawals and there is absolutely no issue on the liquidity front," Kumar said. Rajnish Kumar, Chairman, State Bank of India (SBI) said that the state-run lender will not sell even a single share of the 49 per cent stake it has picked up in Yes Bank before the three-year lock-in period. As part of the credible and sustainable reconstruction plan, an eight-member consortium led by SBI has collectively invested more than Rs 10,000 crore in Yes Bank. Kumar, a former SBI official, also said that the moratorium on the lender has been lifted in 13 days because of support from the government, RBI and other financial institutions. Besides, rating agency Moody's has also upgraded Yes Bank's long-term foreign currency issuer and foreign currency senior unsecured bond programme. Its credit outlook has been changed to positive. KPM ANSANS

You Searched For "Yes Bank deposits" and got 6 results

Simply Put: A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

Ira Alok Puranik

Yes, Wall Street's biggest lenders got even richer after Silicon Valley Bank collapsed

George Glover

Lakshmi Vilas Bank under moratorium— RBI caps maximum deposit or withdrawal at ₹25,000

IANS

RBI assures state governments that their deposits are safe in private banks

PTI

Lord Jagannath of Puri has deposits worth Rs 545 crore in Yes Bank

PTI

Yes Bank administrator Prashant Kumar reassures safety of deposits

PTI

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