As the growth in deposits is on an upswing in the highly volatile market condition and a high interest rate regime, it is the smart money of high net worth individuals (HNIs) that is now flowing into the Indian banking system.
“For the industry, since April 2008, the HNI component of total deposits received has gone up to about 75 per cent,” said Anindya Mitra, senior vice president (retail liabilities) of HDFC Bank.
“Over the last two months almost 40 per cent of the incremental deposits have come from HNI’s who earlier accounted for less than 5 per cent of our deposits,” said KVS Manian, group head, retail liabilities and retail banking, Kotak Mahindra
The money, which earlier went into the mutual funds in search for a high return, is now looking back towards the banks. HNIs had almost deserted the bank deposits. The movement of money flow increased after the mutual funds faced liquidity pressure in October along with the high volatility in equity market that has brought the sentiments down.
“A substantial amount of the fresh deposits is coming from HNIs as they have big sum that they redeemed from mutual funds,” said a senior official with Punjab National Bank.
At this time when the interest rates are high it is only benefiting them. “They have nothing to lose as they are getting high interest rate of 11-12 per cent on their bank deposits,” the official said.
Public sector banks have gained more. “It is true that the PSU banks have gained and are getting a larger share but since there has been an increase in the overall money into bank deposits so even the private sector banks are gaining,” said Manian.
While the deposits by the HNIs have risen significantly, there has also been an increase in the retail money coming to banks.