Deposit pricing sparks concerns about banks

Pricing signals pressure on banks to mobilize deposits for credit growth

- Gopika Gopakumar

Analysts have expressed concern over aggressive deposit pricing by a clutch of mid-sized and small finance banks, with savings products offering interest rates of as much as 8%, as intense competition makes customer acquisition challenging.

DCB Bank is offering an 8% rate, while RBL Bank and Ujjivan Small Finance Bank are luring customers with 7.5%, and Yes Bank is offering 7%. These rates are higher than the term deposit rates in the one-three year bucket offered by top banks. To be sure, these banks have raised their savings deposit rates in the last six months.

“These rates may look irrational and aggressive, but these banks have no option but to offer higher savings rates to arrest the fall in Casa (current and savings accounts)," said Asutosh Mishra, head of research at institutional equities at Ashika Stock Broking.