Page 6 - Banking Finance February 2024

BANK UPDATE

during the first half of 2023-24, with pace of deposit mobilisation to move The liquidity deficit, as reflected by the
the number of cases concentrated in into double digits in 2022 and 2023. amount of money injected by the Re-
card or internet related frauds. serve Bank of India into the banking
Two crucial events which helped to
system, stood at Rs 2.11 lakh crore- its
scale up deposits base were
C S Rajan to be part-time demonetisation of Rs 500 and Rs 1,000 highest level since December 28 when
chief of Kotak Mahindra notes in 2016, and return of Rs 2,000 the deficit stood at Rs 2.68 lakh crore.
notes in the banks in 2023. The liquidity deficit seen in December
Bank was due to advance tax and goods and
RBI has approved the appointment of Investment bankers' fee services tax (GST) payments.
C S Rajan as the part-time Chairman of "It (liquidity tightness) is a case of de-
Kotak Mahindra Bank for a period of income hits record $1.3 posits rising at a lower rate than
two years, effective 1st January 2024. billion in 2023 credit. Both have slowed down, but the
The incumbent part-time Chairman, Investment bankers laughed all the slowdown in deposits is more than in
Prakash Apte's term expires on 31st way to the bank as their fee income credit. Therefore, we are seeing a li-
December 2023, per the Bank's state- touched a new record of $1.3 billion in quidity crunch in the system," said
ment. 2023, growing 28 per cent over the Madan Sabnavis, Chief Economist,

Rajan was appointed as an Indepen- previous year. At $1.3 billion in esti- Bank of Baroda.
dent Director on the Board of the mated fees during 2023, investment In the fortnight ended December 29,
Bank, with effect from 22nd October bankers collected 28 per cent more the bank deposits grew by 13 per cent
2022. An IAS officer of 1978 batch, he than they did last year, and this is the on a year-on-year (y-o-y) basis, while
retired as Chief Secretary of the Gov- highest since records began in 2000, credit grew by 20 per cent, the latest
ernment of Rajasthan in the year 2016. according to the data collated by LSEG RBI data showed. The growth includes
Deals Intelligence, formerly Refinitiv.
He served in leadership roles for 12 the impact of the merger of HDFC with
years in key Infrastructure sectors such The fee income of investment bankers HDFC Bank. Bank deposits rose by Rs
as Energy, Highways, Water Resources got a boost due to higher equity and 23.48 lakh crore in 2023 to touch Rs
and Industry including SSI/MSME and debt issuance volumes which offset the 200 lakh crore mark by December
worked for 14 years in Agriculture and massive plunge in deal activities. 2023.
Rural Development, the Bank said. State Bank of India took the top posi- Sabnavis said a large amount of retail
tion in investment banking fees chart deposits has migrated to mutual funds
Bank deposits double in a with a collection of $ 102.7 million, which is posing a challenge to the
little over 7 years which is 7.7 per cent of the country's growth in deposits.
overall investment banking fee pool,
2023 ended on a high note for com- "This (liquidity deficit) situation may be
according to the agency.
mercial banks with deposits crossing expected to continue as even though
the Rs 200 trillion mark, taking seven credit growth can slow down, albeit
years and three months to double from Banking liquidity deficit marginally, deposit growth will be chal-
Rs 100 trillion in September 2016. The tops Rs 2 lakh crore on lenged as funds are flowing to mutual
last Rs 50 trillion were mobilised in a lower spending, weak de- funds," he said.
record two year and nine months. The latest data from the Association of
posits
Mutual fund AUM, which is one-fourth Mutual Funds in India (AMFI) showed
of total bank deposits, grew by about With the Interim Budget just few weeks that assets under management of the
Rs 20 trillion during the same period. away, the deficit in the banking system mutual fund industry rose to Rs 50.77
The strong credit offtake after the liquidity widened to over Rs 2 lakh crore lakh crore for the first time in Decem-
Covid period propelled banks to garner on January 15 on lower government ber 2023. In 2023, the mutual fund
more money by offering higher inter- spending and slower growth in the bank industry's AUM rose by around Rs 11
est rates on term deposits. This led to deposits compared to credit. lakh crore.

6 | 2024 | FEBRUARY | BANKING FINANCE