Mumbai: Kochi-based Federal Bank has said that the deposit rates, especially the NRE ones, will decline further going forward.
A major player in the NRE deposits space, with nearly a quarter of its total deposit base coming from remittances, the bank reported 62.30 per cent increase in NRE deposit mobilisation in the July-September quarter at Rs 10,748 crore, or 22 per cent of its total deposit base of Rs 49,518 crore.
It has been offering higher than average industry pricing to woo money from NRIs since last December after the RBI liberalised the NRE deposits to arrest the steep plunge of the rupee.
The Non-Resident (External) Accounts, can only be opened in the name of NRI individuals, whether single or joint. “The deposit rates are in general treading down. And it will have to come down further going forward,” Federal Bank MD and CEO Shyam Srinivasan said, when asked whether the bank can sustain such high inflow of NRE funds. He was speaking at the earnings conference over the weekend.
This massive spike in NRE deposit comes against the backdrop of a poor 4.77 per cent rise in total deposits base to the to 49,518.07 crore and had it not been for this count, probably, the bank would have reported a negative deposit mobilisation during the quarter.
During the reporting period, savings and demand deposits rose 14.98 per cent to Rs 14,355 crore, while term deposits rose just 1.1 per cent to Rs 35,162 crore, Srinivasan said. Against this, its net advances grew 8 per cent to Rs 36,299 crore with the retail portion rising 17.6 per cent to Rs 11,374.54 crore.
Even after a reduction of 50 bps in the second quarter, Federal Bank still offers one of the highest pricing on NRE deposits at 9 per cent per annum, while ICICI Bank is a tad better at 9.25 per cent.