Push for cash amid Covid: 159 districts in 25 states see decline in fixed deposits

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Of the 159 districts, at least 15 saw a decline in term deposits for two consecutive quarters during the last financial year -- October-December and January-March.

HIGHLIGHTING THE trend of people increasing their cash holdings to tide over the financial impact of the pandemic, 159 districts in 25 states saw a decline in term (fixed) deposits from January to March, shows an analysis of the latest data reported in the ‘Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks’ released by the Reserve Bank of India.

This marks a sharp spike as the number of such districts was in the range of 22-53 in the 11 quarters between April-June 2018 and October-December 2020 (see chart).

Of the 159 districts, at least 15 saw a decline in term deposits for two consecutive quarters during the last financial year — October-December and January-March.

These 15 districts cut across rural and urban areas across 11 states and include four in Telangana, two in Andhra Pradesh, and one each in Chhattisgarh, Nagaland, Arunachal Pradesh, Gujarat, Karnataka, Jammu & Kashmir, Assam, UP and Maharashtra. They include Bengaluru Rural and Mumbai.

Of these, seven districts — Tuensang, Bhadradri, Bilaspur, Jangaon, West Karbi Anglong, Mumbai and Karimnagar — recorded a decline in term deposits for three consecutive quarters.

The data, released on May 28, are in line with the broader trend of rising cash holdings with people over the last year. Between March 13, 2020 and May 21, 2021, currency with the public rose by Rs 5.54 lakh crore and hit an all-time high of Rs 28.62 lakh crore.

Bankers and economists attribute this rise to people withdrawing money from savings and term deposits to meet livelihood needs and for medical emergencies amid the financial stress caused by Covid and lockdowns imposed by the Centre and states.

Pronab Sen, Country Director, International Growth Centre, says FDs are taken out when there is an increased need for liquidity.

“If you look at the data on currency with the public, it has increased from Rs 18 lakh crore at the time of demonetization in 2016-17 to Rs 28 lakh crore now. This has never happened before. It shows the desire for a higher liquidity. Fixed deposits are most important… During the pandemic, a lot of people are losing jobs and their income is going down. People are drawing down their savings,” Sen told The Indian Express.

An analysis of the recent RBI data shows that out of 705 districts for which comparable data is available, 159 have seen a decline in term deposits in banks in the range of 0.19 per cent to 67 per cent during the last quarter of 2020-21 when compared to the same period in the previous year. Their combined term deposits have come down by 5.86 per cent from Rs 14.94 lakh crore a year ago to Rs 14.06 lakh crore.

Of the 159 districts, 23 are in UP followed by 21 in Gujarat, 16 in Karnataka and 11 in Maharashtra. The sharpest decline in term deposits has been reported from Bihar’s Sheohar (67 per cent) and the lowest in Madhya Pradesh’s Hoshangabad (0.19 per cent).

In this group, however, are districts like Nagapattinam in Tamil Nadu, which reported a decline of 24 per cent in term deposits during January-March in 2020-21 in comparison with the same period in the previous financial year. In this case, one possible reason for the dip is the bifurcation of the district. After Mayiladuthurai was carved out as a new district last April, some bank branches reported their deposits in the newly created entity.

The RBI data on deposits have been classified in three categories — current, savings and term — and term deposits account for over 55 per cent of aggregate deposits. The other two categories account for about 10 per cent and 34 per cent, respectively.

In the January-March quarter of the last financial year, 91 districts recorded a decline in current deposits, much lower than 304 recorded in the same quarter of the previous financial year. Saving deposits saw a decline in 13 districts during the January-March quarter of the last financial year.

The RBI data also show that 23 districts account for more than half (Rs 77.95 lakh crore) of the aggregate bank deposits of Rs 154.39 lakh crore. These districts are: New Delhi, Mumbai, Bengaluru Urban, Mumbai Suburban, Chennai, Hyderabad, Kolkata, Pune, Gurgaon, Ahmedabad, Thane, Lucknow, North 24 Parganas, Jaipur, Gautam Buddh Nagar, Patna, Ernakulam, Khurda, Vadodara, Bhopal, Medchal-Malkajgiri, Nagpur and Thiruvananthapuram.

In contrast, the overall number of term deposits increased by 8 per cent during the January-March quarter of 2020-21.

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