Gujarat: Cash deposits in banks across the state drophttps://indianexpress.com/article/cities/ahmedabad/gujarat-cash-deposits-in-banks-across-the-state-drop-5343928/

Gujarat: Cash deposits in banks across the state drop

A report of State Level Banker’s Committee (SLBC) showed that the deposits in Gujarat decreased from Rs 6,62,394 crore as of March 2018 to Rs 6,56,239 crore as on June, 2018.

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In the three months between April-June 2018, the aggregate deposits of banks in the state decreased by Rs 6,155 crore, which amounts to a negative growth of 0.93 per cent.

Senior bankers said that an erosion in public confidence after several banks were placed under the PCA (Prompt Corrective Action) Framework, have contributed to the dip in deposits.

The Reserve Bank of India had issued a Prompt Corrective Action (PCA) framework to restore the sound financial health of banks. It is intended to encourage banks to eschew certain riskier activities, improve operational efficiency and focus on conserving capital to strengthen them.

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A report of State Level Banker’s Committee (SLBC) showed that the deposits in Gujarat decreased from Rs 6,62,394 crore as of March 2018 to Rs 6,56,239 crore as on June, 2018. This is a negative growth of 0.93 per cent as against a negative growth of 0.09 per cent for the corresponding three-month period in the previous 2017-18 fiscal. During this period, both nationalised and private banks registered a negative growth of 1.82 per cent and 1.44 per cent, respectively.

“Once PCA is imposed on banks, there is a certain level of negativity which is created among the people… Once banks are placed under PCA, certain depositors also tend to withdraw their money or choose to deposit it somewhere else,” said Ramesh Singh, chairman of SLBC-Gujarat, and Executive Director of Dena Bank.

“Secondly, some private banks will try and take advantage of the situation and grab customers from the banks placed under PCA,” Singh added. The 11 banks under PCA are Dena Bank, Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Maharashtra.

According to an RBI directive, by March 31 2019, all banks have to achieve minimum 11.5 per cent CRAR (capital-to-risk weighted assets ratio). To achieve it, banks have to conserve their capital base by reducing advances, the official said.

During this period, the NRI deposits however, increased by Rs 250 crore and stood at Rs 71,933 crore forming 10.96 per cent of the total deposits as on June, 2018.