Banking Sector: Growth in deposits reaches 13-year high during 10MCY20

November 5, 2020 (MLN): Banking sector deposits continue to show robust growth during the ongoing year, as the total deposits held by commercial banks clocked in at Rs 16.66 trillion by the end of October 2020, depicting a growth of 20% YoY and a decline on 1% MoM.

Cumulatively, during 10MCY20, deposits have shown growth of 14%, which is highest in thirteen years. Whereas during 4MFY21, deposits surged by 3%.

The growth in commercial banks’ deposits ascribed to increase in money supply by around 17% YoY and increase in bank deposits from individuals, predominantly salaries class which amount to nearly 14% of total deposits, said the report by JS Global.

Fresh deposits which were utilized in expanding the Investment portfolio grew by 38%YoY, while declined by 1% MoM to Rs 10.94 trillion. As a result of this, banks' investment to deposit ratio (IDR) jumped by 9ppts YoY to 66% in Oct’20. However, compared to previous month, the sector’s IDR remained unchanged.

On the other hand, the demand for fresh disbursements remained muted despite lower interest rates as total advances by commercial banks by the end of October 2020 broadly remained unchanged at Rs 8 trillion, taking advances to deposits ratio (ADR) down by 9ppts YoY to 49%, while in the previous month it stood at 48%.

According to the report, the growth in banking sector’s total deposits is likely to settle in between 18%- 20% for CY20 which will be the highest growth since CY16.

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