The growth of bank deposits across the market have slowed down to 10 per cent year-on-year (YoY) as per the Reserve Bank of India's (RBI) data, said Kotak Securities Ltd in a report.
According to the report, there is a perceptible slowdown in the bank deposit growth in metropolitan, semi-urban and rural India with household savings being relatively weak.
Further the bank branch expansion has slowed down mainly by the public sector banks.
The report said private banks continue to gain market share but their dominance is much more in urban markets as compared to rural and semi-urban markets.
The current account, savings account (CASA) deposits has slowed although the ratio has moved up higher to approximately 45 per cent led by higher savings ratio in recent years.
The private banks have increased their market share in current account and in the corporate segment while public banks have been losing share steadily in the household and government sectors, Kotak Securities said.
As per the report, the duration of term deposits continues to fall, especially post Covid and the share of non-individuals is quite high at 45 per cent of the overall term deposits.
Given the nature of deposits where non-individuals have a higher share in term deposits, the duration of these deposits has declined but it raises concern as it is likely to be sensitive as interest rate reverses, Kotak Securities said.
The growth of CASA deposits is at a much faster pace than term deposits partly driven by slower demand for deposits as loan growth has been slow or probably due to excess savings during the Covid period.
"As loan growth recovers, we are likely to see a greater push towards mobilising deposits, which implies that the competition would shift from CASA deposits to term," Kotak Securities said.
The trend to save through CASA deposits is much higher post demonetization and has accelerated during Covid as well. Trends are showing a sign of reversal as the growth rate has started to slow across regions and banks.