look news india
Mumbai: Due to the pull of liquidity on one hand and the rise in stock markets on the other hand, the deposit flow in the banks of the country has reduced, due to which the situation has become challenging for the banks. Savers are now turning to equity markets instead of putting their savings in bank deposits which offer higher returns. Banking sources said that instead of putting their savings in bank savings accounts or fixed deposits, savers are investing it in high return instruments like equities through mutual fund schemes.
With the development of technology, it has now become easier for savers to invest money in various investment instruments. The combined current account savings account (CASA) ratio of all commercial banks in the country, which stood at 45.20 per cent in March 2022, fell by five percentage points to 40.50 per cent at the end of 18 months ending September 2023.
One reason for the decline in CASA ratio is the increase in fixed deposit rates. But savers, especially urban savers, are also turning to investment instruments like equities rather than fixed deposits.
As a result of digitalisation, it has become easier for savers to access information about more and more investment instruments, which has resulted in a decline in fixed deposits.
In January of the current year, inflows into equity mutual funds stood at a 22-month high of Rs 21,781 crore. Association of Mutual Funds in India (AMFI) sources recently said that January saw net inflows for the 35th consecutive month.
The asset under management of the country's mutual fund industry has also increased to beyond Rs 52.70 lakh crore. The number of Systematic Investment Plan (SIP) accounts has also exceeded 7.90 crore.
Sources also said that the biggest decline in CASA ratio is being seen in private banks as the young generation of the country is tech-savvy and prefer to invest in investment instruments with higher returns than banks.
Banks are not seeing deposit growth in line with credit growth, which is becoming a matter of concern. Banks are forced to raise interest rates to receive more deposits, putting pressure on their margins.