Volatile int rates boost short-term deposits mkt

New Delhi, Oct 24: Due to increasing volatility in interest rates and growing alternative investment avenues, more and more depositors are opting for short-term deposit schemes of all commercial banks rather than the longer schemes.

A study conducted by industry body Assocham revealed that the depositors are going in for 1-2 Year maturity schemes rather than the longer term deposits schemes, which have been losing their sheen from 1998-99 onwards.

The uncertainty and volatility in the interest rate has had the maximum impact on the short-term duration deposit schemes ranging between 91 days to six months. Their percentage share in the total bank deposits have almost doubled from 5.82 per cent in 1998-1999 to 10.51 per cent in 2004- 2005.

Even the three-month deposits have shown a marked increase as compared to long-term schemes of five years and above. The percentage share of saving schemes up to 90 days in total bank deposits has increased from 8.55 per cent in 1998-1999 to 13.91 per cent in 2004-05.

The percentage of 1-2 year maturity deposits schemes in the total bank deposits touched 23.41 per cent in 2004-05 from 22.52 per cent in 1998-99, Assocham President Anil K Agarwal said.

''The bank depositors have responded to change in the interest rate scenario, even as awareness about shuffling their savings portfolio has increased,'' added Mr Agarwal.

The study tracked seven popular schemes of 27 commercial banks, comprising deposits upto 90 days, 91 days-six months, six months-one year, one year-two year, two years to three years, three year-five years and five years and above.

It observed that the 1-2 year schemes had garnered deposits upto Rs 99,119.7 crore in 1998-99, which rose to Rs 249090.8 crore by March 2005 claiming an increase of 23.41 per cent.

Schemes ranging from six months to one year also showed a marginal increase in their deposits from 12.44 per cent in 1998-99 to 14.95 per cent in 2004-05.

However, in longer gestation schemes like those of 5 years and above, deposits were 11.79 per cent of all commercial banks total deposits in March 1998-99. These declined to 8.43 per cent by March 2004-05.

Similarly, 3 to 5 years deposits schemes which accounted for 22.75 per cent in 1998-99, their share in total deposits fell to 18.10 per cent in March 2004-05.

The growth in the share of deposits of 2 years to 3 years schemes also went down from 15.82 per cent on 1998-99 to 10.69 per cent in 2004-05.

UNI