PSBs continue to stuggle for share of low-cost deposits → PSBs share of current and saving accounts has dipped from 33.5% in March 13 to 32.1% in Sept 14 Despite the large footprint and customer base, public sector banks (PSBs) continue to lose low-cost deposits share in total deposits to their private sector counterparts. According to finance ministry data, the share of the low-cost current and savings accounts of PSBs at the end of March 2013 was 33.5 per cent. And, despite expansion in branches, the Casa share fell in 18 months to 32.1 per cent in September 2014. The total base of PSB low-cost deposits rose 10.5 per cent in the 12 months ending September 2014. The government flagged concern on this dip at a meeting of PSB bank chiefs with the Union finance minister last week, said a top executive of a south-based PSB. While admitting to room for pushing Casa growth, executives with state-run banks claim better days are ahead. The stock answer is, they are expanding branches and acquiring new customers. This, over a period, should improve the share of savings deposits. The swelling of numbers of bank accounts through the Jan Dhan scheme provides them an opportunity to rest the slide and better the performance. Broadly, this is a valid explanation. Except that all are following the same strategy and digital banks are rapidly changing the rules of the game. Only offering a higher interest rate might not suffice any longer. The quality of service and product offering, as with attractive discounts for debit card-based purchases, will become a differentiating factor, say experts. Aman Bhargava, director, Financial Services Advisory at Grant Thornton India LLP, said: “Some banks in the private sector have also managed to gain deposit share by giving a higher interest rate on the savings bank account. Moreover, the better customer service and an improved customer interface has drawn consumers to private banks. More persuasive marketing by private lenders has also helped.” In the past year, he said, the overall health of several banks in the public sector space has not been very stable in terms of asset quality, with a rise in bad loans. This negative perception among consumers would have deterred some from opening accounts with PSBs. Ananda Bhowmik of India Ratings believes this steep fall in the Casa share of PSBs could stabilise. “This is because some of them have also started upgrading their technology and providing similar customer service as their private sector counterparts. So, in the next two to three years, we can expect this trend to stabilise,” he added. #PublicSectorBanks #PSB #CASA #LowCostDeposits
Posted on: Wed, 26 Nov 2014 11:00:00 +0000
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