With several of the leading lenders reporting a sequential drop in deposits in the June quarter of FY25, concerns over a prolonged slowdown in bank deposit accretion are far from resolved. Deposits fell 1.15 percent during the quarter compared to the March quarter of the previous fiscal year, according to preliminary data from at least 13 institutions.
In Q1FY25, the Bank of Maharashtra recorded total deposits of Rs 2.67 lakh crore, a 1% decrease from Rs 2.70 crore in Q4FY24. In the same time frame, Yes Bank's total deposits decreased by 0.75 percent, from Rs 2.66 lakh crore to Rs 2.64 lakh crore.
Among the institutions which have disclosed their preliminary Q1FY25 deposit figures, Bandhan Bank had the worst fall in deposits (see table). By the end of June 2024, its deposits had decreased by 1.5 percent to Rs 1.33 lakh crore from Rs 1.35 lakh crore three months earlier in March 2024.
Even if HDFC Bank's deposit performance did not impress Wall Street, the bank's stock has already declined by more than 4 percent in trading. This is because, unlike its smaller competitors, the bank may not have seen a decline in its deposit base over time. In the June FY25 quarter, deposits with HDFC Bank remained unchanged at Rs 23.80 lakh crore.
Based on the banks' past performance, the Bank Nifty index had a 1% decrease, closing at 52573.75 on July 5.
Furthermore unimpressive was the performance in terms of mobilizing low-cost current account - savings account (CASA) deposits. In Q1 FY25, CASA of several leading lenders experienced a sequential decline. CASA deposits held by HDFC Bank as of Q1FY25 were Rs 8.63 lakh crore, down 5% from Rs 9.08 lakh crore in the previous quarter.
The private institutions with the biggest decline in CASA deposits were led by Bandhan Bank, which had an 11.1% decline to Rs 44,453 crore from Rs 50,151 crore. For Q1FY25, Yes Bank reported a 1.1% decrease in CASA to Rs 81,405 crore.
CASA deposits at the state-run Bank of Maharashtra also decreased 6.6% sequentially in Q1FY25, totaling Rs 1.33 lakh crore. While consecutive declines in deposits in the June quarter of a new fiscal year are not a particularly concerning tendency, analysts point out that this was not the case during the pandemic years of FY20–FY23. A domestic brokerage's banking expert stated, "We are witnessing such a noticeable decline in deposits on a sequential basis after many quarters." The expert continued, "Even though the repo rate appears to have stabilized, strengthening the deposit base remains a challenge for the banks."
However, bank deposits other than CASA appear to be increasing, according to Saurabh Bhalerao, associate director of BFSI at CareEdge. "Since other deposits, like time and bulk, are growing, banks should start concentrating on CASA." He continued by saying that the banks could have trouble attracting inexpensive deposits.
Boosts Development
Even if the deposit data for Q1 wasn't promising, the advances market continued to increase rapidly. All banks reported a sequential rise in advances, with the exception of HDFC Bank, which saw a decrease in the growth of advances.
The total advances made by Yes Bank increased by 0.88 percent to Rs 2.29 lakh crore in Q1FY25 from Rs 2.27 lakh crore in Q4FY24. The advances for Federal Bank increased from Rs 2.12 lakh crore to Rs 2.24 lakh crore, a 5.56 percent increase.
Over the same time, Bank of Maharashtra's advances increased by 3% to Rs 2.09 lakh crore from Rs 2.03 lakh crore.
The only bank to disclose a decrease in advances was HDFC Bank, which stated that total advances in Q1FY25 were Rs 24.87 lakh crore, down 0.79 percent from Rs 25.07 lakh crore in Q4FY24.
