The Hindu : Business : Study shows bank depositors prefer short-term schemes

Online edition of India's National Newspaper
Tuesday, Nov 07, 2006
ePaper

Business

Business

Study shows bank depositors prefer short-term schemes

Staff Reporter

Volatility in the interest rate on short-term deposits has maximum impact

KOCHI: With increasing volatility in interest rates and growing number of alternative investment avenues, more and more bank depositors are going in for one to two year maturity schemes of all commercial banks rather than the longer term deposits schemes, which have been losing their sheen from 1998-99 onwards, according to a study conducted by the Associated Chambers of Commerce and Industry of India.

Although one to two year maturity deposits schemes have always remained among the favourite choices for depositors, these have become the most popular avenues for depositors to park their money in recent times. Their percentage in the total bank deposits has touched 23.41 per cent in 2004-05 from 22.52 per cent in 1998-99, the study said.

The uncertainty and volatility in the interest rate has had the maximum impact on the short-term duration deposit schemes ranging between 91 days and six months. Their percentage share in the total bank deposits has almost doubled from 5.82 per cent in 1998-99 to 10.51 per cent in 2004-05, according to the study.

Even the three months deposits have shown a marked increase as compared to long-term schemes of five years and above.

The percentage share of saving schemes up to 90 days in total bank deposits has increased from 8.55 per cent in 1998-1999 to 13.91 per cent in 2004-05.

The study tracked seven popular schemes of 27 commercial banks, comprising deposits up to 90 days, 91 days to six months, six months to one year, one year to two years, two years to three years, three years to five years and five years and above.

It has been observed that one to two year schemes had garnered deposits up to Rs.99,119.7 crore in 1998-99, which rose to Rs.2,49,090.8 crore by March end 2005 claiming an increase of 23.41 per cent.

Schemes ranging six months to one year also showed a marginal increase in their deposits from 12.44 per cent in 1998-99 to 14.95 per cent in 2004-05.

Likewise, the growth in the share of deposits of 91 days to six months schemes also went up from 5.82 per cent in 1998-99 to 10.51 per cent in 2004-05. Similarly, deposits in the less than 91 days category which accounted for 8.85 per cent in 1998-99 accounted for 13.91 per cent in 2004-05.

However, in longer gestation schemes like schemes of five years and above, deposits were 11.79 per cent of all commercial banks' total deposits in March 1998-99.

These declined to 8.43 per cent by March 2004-05. Similarly, three to five years deposit schemes which accounted for 22.75 per cent in 1998-99 fell to 18.10 per cent in March 2004-05.

Likewise, the growth in the share of deposits of two years three 3 years schemes also went down from 15.82 per cent in 1998-99 to 10.69 per cent in 2004-05, according to the study.

Printer friendly page
Send this article to Friends by E-Mail

Business