Home / Industry / Banking /  Bank deposits show an interesting trend: Rise, fall and then rise again

A recent research report by the State Bank of India (SBI) highlights the change in trend in deposits in the first three fortnights of FY22 from FY21. The report notes that the deposit growth of banking system for FY22 has revealed periods of alternate expansion and contraction.

The report by the research team of the bank said that it is well known that both deposits and credit of all the banks decline in April and May. However, it is interesting to note that the trend in deposits has changed from FY21. The note pointed out that deposits have shown alternate periods of expansion and contraction in FY22 in first 3 fortnights.

The bank deposits have showed an interesting trend during the first 3 fortnights (April to May). During the first fortnight, it rose by 1,01,357 crore, while declining by 80,579 crore during the second fortnight and then rising again by 82,555 crore.

Bank deposits trend
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Bank deposits trend

As per the report, deposits had increased by a staggering 2.8 lakh crore in FY21 & in FY22 it has already increased by 1.0 lakh crore till 07 May, 2021.

Explaining the possibility of such trend, the note said ‘’It is possible that such expansion followed by contraction could indicate household stress as people getting salary credits in first fortnight are withdrawing it in second fortnight for health expenses / stocking up currency for precautionary motive and an uncertain scenario and the trend continues.’’

So far, we have got only 3 fortnights of deposit data & this trend would be validated once we have the complete data in the first week of June, SBI research added.

Separately, the report stated that Covid-19 infection is still spreading in rural areas. The share of rural districts in new cases is rising quite rapidly during May, even though overall cases have started to decline from the second week of May. It has increased from 45.5% in April end to 53.6% as per the latest data. Notably, this is same as the peak of 53.7% observed during end-Aug’20. Top 20 rural districts now account for around 15% of country-wise new cases with hinterlands of Andhra Pradesh, Maharashtra and Karnataka continuing to be the worst affected as per the reported data.

The report estimates India’s gross domestic product (GDP) growth for the fourth quarter to be around 1.3%. ‘’Based on our model the forecasted GDP growth for Q4 would be around 1.3% (with downward bias) as against NSO projection of a negative –1%. We now expect GDP decline for the full year to be around 7.3% (compared to our earlier prediction of -7.4%).’’

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