The global financial meltdown and a consequent wariness among customers towards foreign banks have led to a huge slowdown in their deposit base growth. The surprise winners seem to be sturdy old public sector banks, considered a safe bet in a maze of financial uncertainties.
Once considered unglamorous, public sector banks have spent the past few years dressing up their balance sheets while also picking up tricks in marketing, advertising and customer service from multinational banks.
With a history of highly organised trade unions and complaints of shoddy retail service, public sector have had a legacy of problems, but the global meltdown appears to have given them a new lease of life.
While public sector banks saw a deposit growth of 24 per cent in the previous fiscal year, 2008-09, as compared to 23 per cent in 2007-08, foreign banks saw a mere 7.8 per cent increase in 2008-09 as against 29.1 per cent in 2007-08, according to a Reserve Bank of India data.
“With most banking biggies including Citibank being affected by the global slowdown, consumers in India are turning to the PSU banks, which have gained significantly in the last few months,” a PSU bank executive, who did not wish to be quoted told Hindustan Times.
However, the economic downturn has impacted the overall deposit growth. Deposits growth decelerated to 20 per cent in 2008-09 from 22.5 per cent in the previous year. With inflation touching double-digit figures in 2008-09, PSU banks were also led to offer high interest rates on term deposits.
“Investors opted for bank deposits to park their funds especially with the uncertainty in the stock and real estate markets,” said J. M.Garg, chairman and managing director, Corporation Bank.
Though stock markets have recovered, the general belief in banking circles is that savings are expected to be parked in banks in large quantities in the next two quarters.
Bank deposits are set to see a healthy growth in the coming months, bankers say.