Banks adapt to changing customer behavior amid low interest rates | India Business News – Times of India

Mumbai: As inflation bites into savings and banks remain adamant about not raising interest rates on savings deposits, customers are transforming from savers to investors. This has caused banks to reevaluate their strategies.
“The saver-to-investor movement is quite accentuated, and it has only galloped after the elections. That is why you are seeing pressure on savings accounts where funds are going into mutual funds, SIPs or even term deposits,” said Shanti Ekambaram, deputy MD, Kotak Bank.

Since March 2020, the share of deposits in savings accounts has dropped to 31.2% from 32.8%, while the number for current account has remained unchanged at around 9.5%.The share of term deposits has risen to 59% from 57.8%. Adjusted for inflation (5%), most savings accounts are yielding negative returns, but none of the banks are looking at hiking rates.
Ashok Vaswani, MD & CEO of Kotak Bank, in an analyst call said the bank sees itself as the holding company for other businesses, generating value from money that moves from the bank to capital markets or insurance.
To grow the deposit base, the bank aims to strengthen its franchise by making savings accounts easier to open and bundling offers for key segments. It relaunched a programme that sweeps money from savings and current to term deposits and has introduced a micro-market strategy to grow the deposit base.
HDFC Bank’s strategy is to significantly grow its branch network and customer base while fostering deeper connections with existing customers. The bank’s focus is now on granular retail deposits, which are the individual balances retained in customer accounts.
“We want the branches to drive granular deposit growth and not look for non-retail or large ticket-sized deposits” said Srinivasan Vaidyanathan, CFO, HDFC Bank. He added that the ‘star’ in resources mobilisation was fixed deposits which have grown by Rs 44,300 crore or 24% over the previous year.
Yes Bank has added 140 branches since Jan last year. This year, it plans to add 30-50 branches. Rajan Pental, head of retail at the bank, said that there has been a marginal uptick on the cost of new deposits, but it does not move the needle.
“The customer needs money for transactions, investment, for spending which has to come through the banking channel, which we are in a position to augment and make them do transactions through RBL Bank with our differentiated service and interest rate,” said R Subramaniakumar, MD & CEO, RBL Bank.