PSBs Are Asked to Stay Away From Bulk Deposits

Government has advised the Public Sector Banks to stay away from the Bulk Deposits and to be focused on Low Cost CASA deposits. The instructions has been given during the recent review meeting with Department of Financial Services (DFS) and banks. These discussions were also held as part of a three-year roadmap (FY 24-26) for public sector banks.

“The caution on high-cost deposits is a part of the review of the asset liability risk management practices followed by banks,” a government official said, adding that it was also pointed out that another challenge for PSBs is to arrest the decline in current and savings account, or CASA, which has come down to 57% in March 2023 from 64.9% in 2018, ET reported.

In the recent past, the cost of deposits for all banks has increased by 1-2% in the last year, including for the country’s largest bank, State Bank of India, where cost of deposits jumped from 3.84% in September 2022 to 4.65% in September 2023. In the past also the high-cost deposits impacting their performance.

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Bank of Baroda bulk deposits, including certificates of deposit or CDs, increased by 59% from Rs 1.36 lakh crore in the last year.