The sudden drop in aggregate deposits after a sharp increase is a contrarian trend that emerged in November, according to Soumya Kanti Ghosh, group chief economic adviser, State Bank of India.
According to provisional data released by the RBI for the fortnight ended Nov. 19, all expected aggregate commercial bank deposits (ASCBs) fell 2.7 lakh crore during the fortnight.
The collapse in deposits follows a sharp increase of ₹ 3.3 lakh crore in the previous fortnight ended on November 5.
“It’s interesting that such growth in deposits was about 36% of the additional growth in deposits at that time. This increase in deposits and the ensuing collapse is quite the opposite trend. While it may be exactly difficult to decipher the increase and subsequent decline, it does raise questions about cash management / financial stability or a behavioral trend change in customer payment habits through digitization and therefore a decrease in currency leakage and a concomitant increase in deposits or both, ”Ghosh said in the latest edition of SBI Ecowrap.
24 year record
According to Ghosh, the bimonthly increase of 3.3 lakh crore never happened during a week of Diwali, as there is always a currency drain and a concomitant drop in deposits. It is also the fifth largest increase in a fortnight over the past 24 years.
The bimonthly drop in deposits over the next fortnight could be due to a large influx of deposits into the banking system for the fortnight ending Nov. 5 in anticipation of a build-up of the stock market recovery after the primary issuance of new age companies and others.
However, when such a rally did not materialize, the increase in bank deposits collapsed and nearly 80% of the increase in deposits was withdrawn. Interestingly, the amount of money parked in the fixed reverse repo window went from 0.45 lakh crore on October 19 to ₹ 2.4 lakh crore on November 17 and remained at that level until December 1, “Ghosh said.