PSBs hold more fully insured deposits than private banks

Public sector banks (PSBs) have a much higher insured deposit ratio vis-à-vis private sector banks (PVBs), indicating concentration of larger-sized deposits with the latter, according to the latest Financial Stability Report (FSR).

The insured deposit ratio (insured deposits/assessable deposits) of PSBs was at 51.3 per cent vs 36.6 per cent for PVBs at the end of March 2023, per the report, which has contributions from all financial sector regulators.

This metric indicates that PSBs have more deposits within the present deposit insurance limit of Rs. 5 lakh, while PVBs have more deposits above the Rs. 5-lakh limit. Deposit amount over and above the Rs. 5-lakh limit has no insurance cover.

The larger deposit size of PVBs comes in the wake of these banks offering higher (term) deposit rates vis-a-vis PSBs in the rising interest rate cycle.

Aggregate deposits growth, which had undergone a slight moderation during 2021-22 and H1 FY23, picked up pace to reach 11.8 per cent as on June 02, 2023. The report underscored that this growth was mainly driven by PVBs.

Overall, the insured deposit ratio was higher for cooperative banks (64.9 per cent) followed by commercial banks (45.2 per cent).

Co-operative banks include urban co-operative banks, State co-operative banks and district central co-operative banks. Commercial banks include PSBs, PVBs, foreign banks, small finance banks, payment banks, regional rural banks and local area banks.

According to the report, 98.1 per cent of the total number of deposit accounts (300 crore) and 46.3 per cent of assessable deposits (Rs. 181.14 lakh crore) were fully insured.