MUMBAI: Banks have received nearly Rs 60,000 crore in deposits following the withdrawal of Rs 500 and Rs 1,000 currency notes. SBI alone has raised about Rs 39,677 crore in deposits following the withdrawal of high denomination notes. Bankers expect the surge in deposits to bring down interest rates.
“We have received deposits of Rs 11,000 crore in savings accounts in one day. Normally, it takes a month to mobilise Rs 8,000 crore of savings deposits,” said SBI chairman Arundhati Bhattacharya, while announcing the results on Friday afternoon.
At the end of the day, the bank said that the collections on Friday amounted to Rs 17,527 crore on the back of Rs 22,150 crore on Thursday. For exchange, the country’s largest bank received Rs 723 crore worth of notes on Thursday and another Rs 943 crore on Friday.
According to Bhattacharya, demonetisation tends to have a deflationary impact. Also, the surge in low-cost deposits will bring down the bank’s cost of funds.
Taken together, both measures would help bring down interest rates. Before demonetisation, the public held around Rs 14 lakh crore in Rs 500 and Rs 1,000 currency notes. These notes have to be exchanged or deposited in banks and post offices.
Although a large chunk of the deposits are expected to be withdrawn, bankers say that demonetisation would lead to a sustained reduction in the use of cash. The increase in bank deposits would also lead to a reduction in bond yields and interest rates in the money market. An increase in deposits would compel banks to invest more in government bonds. Given the limited supply of government bonds, there would be an increase in price which translates into a drop in yields (since both are inversely related to each other). An increase in the price of bonds helps to boost bank’s treasury profits.
Banks, meanwhile, have been asked to keep a watch for suspicious transactions, including multiple deposits and high-value deposits into accounts of those belonging to the lower-income group and report them to tax authorities.
Source: Times Of India
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