Banks’ Q3 deposits surge
1 min read . Updated: 05 Jan 2023, 10:29 PM IST
PremiumPrivate sector lender HDFC Bank Ltd reported 20% deposits growth from a year ago, outpacing its loan book growth of 19.5% in Q3.
MUMBAI : Banks reported strong growth in deposits in the December quarter following an increase in interest rates in past three months. According to an early business update for October-December lenders have shored up deposits despite an overall decline in current and savings accounts.
Private sector lender HDFC Bank Ltd reported 20% deposits growth from a year ago, outpacing its loan book growth of 19.5% in Q3.
However, its current account-savings account (CASA) ratio declined to 44% as of 31 December, compared to 47.1% in the year ago, and 45% as of 31 September 2021. Its CASA ratio has been declining for the past four quarters.
Yes Bank, too, posted 15.9% deposits growth compared to advances growth of 11.7% from the year earlier.
IndusInd Bank, CSB Bank, Federal Bank, RBL Bank, and AU Small Finance Bank posted double-digit deposit growth, which is higher than the sector’s deposit growth of 10%.
“Interest rate pressures persisted in Q3FY23 with a sharp rise in banking system deposit rates. The bank increased its deposit rates which resulted in higher traction in term deposits as against savings deposits.
However, the bank continued its approach of calibrating the funding mix with focus on optimising cost of funds and therein securitised asset portfolio of ₹1,164 crore during the quarter. Despite the uptick in Q3 funding cost the bank has been able to protect margins so far," said AU Small Finance Bank in its Q3 business update.
Since May 2022, banks have raised deposit rates by up to 200 basis points, with much of the hike seen in the last three months.
Analysts said incremental rise in deposit rates will moderate as the current rates are far higher than pre-covid level. ICICI Bank, for instance, is offering one-year deposits at 7.1% as of December compared to 5% in May 2022, and 6.2% in March 2020.
However, banks are likely to see a rise in cost of funds as the outstanding deposits come up for repricing later this year, which could impact margins.
“The pressure on margins will start from the first quarter of 2023-24 as loan repricing, driven by repo rate hikes, start slowing. Even as upward pricing of assets slow down, upward pricing of deposits will continue as existing deposits are repriced at higher rates. Margin will moderate through subsequent quarters," said Anil Gupta, vice president, Icra Ratings.
