KOCHI: Even as the banks in Kerala are frantically running around for fresh deposits by raising interest rates in order to fund their fast growing loan book, Kerala State Cooperative Bank (KSCB) alias Kerala Bank remains cool and is never bothered to increase its deposit rates.
While most banks offer higher rates in the region of 7.5 per cent and upwards, Kerala Bank’s highest offered interest rate is 6.75 per cent, which was fixed in October 2022, despite the RBI having increased its repo rate by 60 basis points to 6.5 per cent since then through two raises.
Contrary to the general trend, Kerala Bank’s deposit base has shrunk by 3.3 per cent during the one-year period between September 2021 and September 2022 from Rs67,866.27 crore to Rs65,630.73 crore.
Kerala Bank seems to be unperturbed about the way other banks are hunting for deposits by offering higher interest rates in order to expand their balance sheet.
In an endeavour to attract a fair share of deposits from the market, most banks have raised the interest rates taking them up to one of their highest in the recent times.
The available data shows that while South Indian Bank (SIB) currently offers rates as high as 7.4 per cent, CSB offers 7.5 per cent, Federal Bank offering 7.25 per cent and Dhanlaxmi promising as high as 7.25 per cent interest for deposits, Kerala Bank’s highest offered rate is far lower at 6.75 per cent.
Mind you, RBI’s current repo rate, which is considered the benchmark rate by the market, is now at 6.5 per cent.
While the real concern of the banks today is how far they could grow their deposit base so as to support their fast-growing loan book, surprisingly, Kerala Bank doesn’t seem to face such a challenge as the state’s ‘Dream Bank’ has ‘enough’ deposit at its disposal.
In fact, Kerala Bank has gone so easy on deposits that its deposit portfolio has contracted by 3.3 per cent from Rs67,866.27 crore to Rs65,630.73 crore in the one-year period between September 2021 and September 2022 though the advances have improved in volume marginally during this period from Rs40,982.26 crore to Rs44,153.37 crore.
The relatively low loan off-take at Kerala Bank is reflected in its lowest loans to deposits ratio or credit-deposit ratio (CD ratio) among all banks, at 67.27 per cent.
Even after having built a strong deposit book through the past few months, by offering high interest rates, all other banks enjoy a far higher CD ratio than that of Kerala Bank as shown in brackets – South Indian Bank (77.33 per cent); CSB Bank (81.44 per cent) Federal Bank (84.9 per cent) and Dhanlaxmi Bank, the lowest among the four banks at 71.58 per cent.
Loan growth way ahead of deposits
The Covid period is far behind us and the pent up demand for loans is prompting the banks to hunt for additional deposits.
The statistics released by the banks show that while SIB’s deposits base grew by a marginal 3 per cent from Rs88,348 crore to Rs90,672 crore during the one-year period ending December 31, 2023, its advances increased 18 per cent, from Rs59,226 crore toRs70,117 crore.
In the case of Federal Bank, it was a 14.81per cent deposit growth versus 19.08 per cent growth in advances to Rs1,71,043 crore.
For CSB Bank it was 19 per cent growth in deposits against 26 per cent growth in advances from Rs14,637 crore to Rs18,457 crore, whereas in the case of Dhanlaxmi Bank, while its total deposits grew by 6.78 per cent from Rs12,101 crore to Rs12,922 crore, advances soared by 22.48 per cent from Rs7,552 crore to Rs9,250 crore during the period under review.