SynopsisIndian households are reportedly shifting savings back to bank deposits due to weak stock markets and geopolitical concerns. This trend could benefit lenders facing intense competition for credit demand, as bank credit growth outpaces deposit increases. The move signals a potential return to traditional fixed deposits amid equity market volatility.AgenciesYes BankIndian households are considering shifting savings back to bank deposits as weak stock markets and geopolitical worries sap demand for riskier assets, the chief executive officer at Sumitomo Mitsui Banking Corp.-backed Yes Bank Ltd. said.“Anecdotally, both at the bank and across the industry, we see some savings returning to deposits,” Vinay Tonse, the head of India’s sixth-largest private sector lender, said in an interview. “We are receiving a lot of inquiries about whether this is a good time to shift from equities to fixed deposits.”A gradual return to fixed deposits could provide relief to lenders that have struggled to keep pace with credit demand amid intense competition. Bank credit in India grew 16.2% in the year through May 15, the fastest pace since June 2024, according to data from the central bank, while deposits increased 12.2% over the same period.Indian stocks surged from pandemic-era lows to a record in September 2024, making the NSE Nifty 50 Index the world’s best-performing major market. Since then, lofty valuations and the artificial intelligence-boom elsewhere have drawn foreign investors away, while higher oil prices linked to the Iran war have added pressure. Indian equity mutual fund inflows posted their biggest drop in three years in May.SMBC, part of Japan’s second-largest banking group, became the top shareholder of Yes Bank with a 24.9% stake last year. At that time, the deal marked the biggest foreign investment in India’s growing banking sector, which has attracted a slew of Japanese and other firms.Tonse, a banker with more than three and a half decades of experience, said Yes Bank had signed agreements with SMBC to cross refer clients for retail offerings and deposits, seeking to capitalize on the lender’s relationship with large corporates. Tonse previously led State Bank of India’s retail operations, overseeing around $800 billion, the largest such franchise in the country.Yes Bank’s shares have risen 3% so far this year, while the broader banking index has dropped about 7%.BloombergHousehold financial savings in India have increasingly migrated from bank accounts into equities and mutual funds in recent years as returns outpaced those on traditional fixed deposits. While some of that money has found its way back into banks through deposits from asset managers and other financial institutions, such funding is considered less stable and attracts higher regulatory requirements.With more than 1,300 branches, Yes Bank is seeking to leverage its franchise to raise deposits, said Tonse, who took over as CEO in April. The lender has begun cutting deposit rates faster than the industry, to avoid chasing growth through increasingly expensive funding, he said.Larger peers HDFC Bank Ltd., ICICI Bank Ltd. and Axis Bank Ltd. are also focusing on expanding retail deposits, while lenders have adjusted rates and product offerings as competition for household savings remains intense.Returns from monthly equity investment plans linked to the Nifty 200 Index turned negative over a two-year period earlier this year. They also trail bond yields over a five-year period, according to an analysis by Bloomberg Intelligence. Bond yields are often a factor in pricing banks’ deposits and loans.Yes Bank, the sixth-biggest private sector lender by assets, also plans to expand across the retail lending spectrum, including home and auto loans, after previously avoiding lower-yielding products, said Tonse. The bank’s loans grew 11.1% in the March quarter from a year earlier, while deposits rose 12.1%.Read More News on...moreless