Aggregate bank deposits slump in fortnight to Nov 19 after abrupt rise in previous 15 days: SBI Research

MUMBAI: The massive fortnightly spike in bank deposits by a whopping Rs 3.3 lakh crore — the fifth biggest rise in 24 years — for the fortnight to November 5, 2021, and a subsequent plunge of Rs 2.7 lakh crore in the next fortnight can be due to the expected IPO boom and subsequent poor show in the later weeks, a report says.

Such a massive deposit accretion has never happened during a Diwali week as there is always a currency leakage and concomitant deposit decline, says an SBI Research report, adding this is also the fifth largest increase in any fortnight in the past 24 years since 1997 and the Rs 2.69 lakh crore subsequent deposit slump for the fortnight to November 19 is the largest since 1997.

Such a huge incremental addition has happened only a few times: during the fortnight to November 25, 2016 by Rs 4.16 lakh crore after the note ban, for the fortnight to September 26, 2016 by Rs 3.55 lakh crore, March 29 2019 by Rs 3.46 lakh crore and April 1, 2016 by Rs 3.41 lakh crore, it said.

While November 2016 was due to the demonetisation and the March and April of the same year could be attributed to seasonal year-end bulge, Soumya Kanti Ghosh, the chief economic adviser to the State Bank Group, said in a note on Friday.

According to the provisional RBI data for the fortnight to November 19, the aggregate deposits of commercial banks have slumped by Rs 2.7 lakh crore.

The slump in deposits follows an abrupt increase by Rs 3.3 lakh crore in the previous fortnight ending November 5, 2021-- this was 36 per cent of the incremental deposit growth for the period to Rs 9.35 lakh crore.

In fact, the Rs 3.3 lakh crore fortnightly deposit bulge is the fifth largest fortnightly increase since 1997 and the Rs 2.69 lakh crore subsequent deposit slump (fortnight ended Nov’19) is the largest since 1997.

Such an increase in deposits and subsequent slump is quite a contrarian trend, he said, adding while it is difficult to decipher the increase and subsequent decline, it does poses questions on liquidity management/ financial stability or a shift in behavioural trend in customer payment habits through digitisation and hence lower currency leakage and concomitant deposit bulge or both.

On the fortnightly deposit slump in the subsequent days period, Ghosh said it was possible that there was a large influx of deposits into banking system for the fortnight to November 5, 2021 in anticipation of a build up in rally in stock markets postprimary issuances of new age companies and others.