Banks losing deposits to govt savings, mkts

New Delhi: Global brokerage Goldman Sachs has flagged multiple headwinds to deposit growth in Indian banks as it loses its attractiveness. It has cited head winds like strained financial savings, the rise of alternatives such as stock market investments and strong growth in alternate government savings schemes (PPF and Small Savings), size of which has grown to 21 per cent of the total deposits.

Interestingly, increase in alternative government savings schemes is equivalent to 34 per cent of the increase in deposits over FY21-23, Goldman Sachs said. It said: “We believe the system would need to offer attractive rates to make bank-deposits attractive. We believe consumer lending is nearing the consolidation phase driven by large volumes of unsecured lending with an estimated 120mn unsecured personal loans which increased 4X over the last three years; rising financial leverage at Households with gross-financial-liabilities to gross-financial-assets increasing to all time peak of 40 per cent, a sharp reduction in net financial assets (financial savings minus financial assets) from 11 per cent+ of GDP to less than 5 per cent of GDP and deteriorating performance of portfolio on boarded over the last 12 months.”