Indian people are investing more in the short-term bank fixed deposits (read: three-month & six-month which they were to invest in real estate and equity markets. Due to this on an average there has been a 40 to 50% growth in the fixed deposits for shorter tenures.
According to Bankers market instability and general lack of confidence is the reason behind the investors opting for short-tenor product. In the last few months Kotak Mahindra Bank has seen its inflows more than doubling on fixed deposits (FDs), while the Bangalore-based ING Vysya Bank has witnessed an over 50% increase in its short-term deposits.
On the other hand Axis Bank, has accounted a growth of 25-30% in the 20-20 version of FDs. HDFC Bank India’s second largest private bank, also reported a high growth in fixed deposit. In the last nine months bank’s deposits have increased by almost 80%. According to latest data given out by Reserve Bank of India (RBI) in October alone, Indian banks had seen a raise in terms deposits worth Rs 94, 811 crore.
But bankers are of view that the high growth numbers is dangerous for the capital markets. As most of the investors, have withdrawn their funds from mutual funds and cleared up their stock portfolio to deposit with banks. K V S Manian, group head retail liabilities & branch banking, Kotak Mahindra Bank reportedly said that the latest trend is indicative of investor outlook towards equity markets in the short-term.
“We have in general seen a higher customer inclination for FDs. While the lower retail segment was always inclined towards the product, the attractiveness of current rates has enhanced their interest. However, in case of the high net worth individual segment, there’s a definite shift in attitude around this product of late,” he said.
Uday Sareen, country head, retail banking, ING Vysya Bank think this phenomenon, is quite broad based across the entire range of customers. “Given the current mood, individuals are deferring their decision to invest in real estate, stock market, and other investments. Gradually as people realign their expectations to the new financial paradigm, they will be willing to reassess their financial risk profile, financial goals and re-balance their portfolios,” he said.
While Manju Srivatsa, president, retail banking, Axis Bank feels, 25-30% growth in short-term FDs is a huge number in such a short period of time. “It’s a massive turnaround. There’s an overall increase in the demand and interest in FDs,” she said.
On the other hand Anindya Mitra, senior vice-president, retail liabilities, HDFC Bank, is of view that such trend might continue, till the equity market stabilizes. “Capital protection is on top of the priority with investors right now. At least, in the short-term, equity is getting substituted by FDs in an investor’s portfolio,” he said.
