Chennai: Small Finance banks (SFBs) recorded a deposit growth of 130 per cent in FY19. They are expected to continue to see increased traction in deposits on the back of higher interest rates, focused marketing strategies and maturing branches, finds India Ratings and Research.
SFBs incrementally mobilised deposits of Rs 28,850 crore in FY19. The share of deposits to non-equity liabilities grew to 59.6 per cent in FY19 against 37.6 per cent in FY18.
According to Ind-Ra, the SFBs have been offering interest rates which are 1-2 per cent higher than most banks and they have grown the branches by 40 per cent in FY19. Increasing number of matured branches also has helped deposit growth.
However, lower CASA (Current Account and Savings Account) ratio is a challenge for SFBs. Although these low-cost deposits increased 76 per cent y-o-y to Rs 97.6 billion in FY19, the ratio has seen a decline to 19.2 per cent in FY19 against 25 per cent in the previous fiscal.
Traction in term deposits increased and savings deposits were converted to term deposits owing to the high rates offered by SFBs. The building of a CASA franchise depends on factors such as developing long-term customer relationships, ensuring ease of transactions, fostering trust in the brand, having a large branch network etc.
Large commercial banks benefit from vintage, resulting in deposits from large corporates, government departments, trusts schools and hospitals, businessmen, etc.
