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Investors fancy deposits as scrips sink

Bank deposits have grown over 25 per cent in the current fiscal, thanks to the uncertainty in the financial sector and an increase in deposit rates, reports Mahua Venkatesh.

india Updated: Dec 28, 2008 20:37 IST
Mahua Venkatesh

Bank deposits have grown over 25 per cent in the current fiscal, thanks to the uncertainty in the financial sector and an increase in deposit rates.

Investors have shown a preference to bank deposits to any other instrument due to the volatility in the stock market, bankers said. Analysts pointed out that preference for bank deposits will continue among investors even as there are signs that interest rates to deposits will come down.

This is because investors, who earlier were willing to take risks, are becoming more and more risk averse in the wake of the deepening of the financial crisis.

“Bank deposits are considered among the safest investment options and even if we see interest rate coming down, we will continue to see deposits surging in the coming months,” Delhi-based investment analyst Surya Bhatia said.

Saugata Bhattacharya, vice president, Axis Bank added that the boost in deposits has also eased the liquidity situation. “There have been a surge in deposits in the last few months,” Saugata Bhattacharya, vice president, Axis Bank told Hindustan Times.

Deposit growth has been slow in the last few years. The finance ministry, in fact, had directed the banks to focus on increasing their deposit base in order to keep pace with the credit growth. “This year, credit has slowed down while deposits have seen a huge growth,” a senior banker, who did not wish to be quoted, said.