Kotak Mahindra Bank has garnered about Rs 5,400 crore of fresh deposits courtesy of the RBI's move to withdraw the Rs 2,000 denomination notes, a top official said on Thursday.
The majority of the customers depositing the money are businesses, and the money is coming into current accounts held by them, the private sector lender's president for retail liabilities and branch banking Virat Diwanji told reporters here.
"We have got more than our fair share of our deposit share. We have 2.2 pc of deposits (in the system). If I do the math based on what RBI has declared, perhaps the share that I have got is higher than my 2.5 pc. It is almost...close to 3.5-4 pc of the total (declared by the Reserve Bank)," Diwanji said.
On June 8, Reserve Bank Governor Shaktikanta Das had said that the system has seen Rs 1.80 lakh crore of Rs 2,000 notes being returned since the central bank announced the move on May 19, with 85 per cent of it being deposits into banks and the rest being exchanged.
Diwanji said the bank's experience of the split between deposits and exchange is similar to the system's experience and added that the bank has received about Rs 5,400 crore as deposits.
He, however, was quick to add that the jump in deposits is a temporary phenomenon as the business people will be eventually deploying the same money for other purposes like paying vendors.
Diwanji explained that people are not queuing up in panic at banks as sufficient time has been given to them, and because the note continues to be a legal tender. Rather, they are going out and utilising the notes for their usual spending, which is leading to the accumulation of the notes with businesses, which are in turn coming to the banks with the notes.
Like all private sector lenders, the bank is insisting on certain personal details for exchanging the notes, Diwanji said.
The bank launched a new 180-day fixed deposit product christened 'Activmoney' on Thursday, which will not have the provision for any penalty for premature withdrawals, unlike other fixed deposits.
Its current and savings account holders can set a threshold above which all the funds will automatically get converted into a fixed deposit (FD) and earn higher interest, Diwanji said, adding that it can get up to 7 per cent interest rate as per current deposit rate structures under the new product.
Amid the elevated rates scenario, smart depositors have started diverting money into higher-yielding assets like fixed deposits and liquid funds, but there continues to be a large quantum of money of over Rs 62 lakh crore in savings accounts that can be deployed for higher returns, he said.
He exuded confidence that the incremental current account and savings account deposits from existing and new bank customers will cover the cost of higher interest payments that the bank will have to make.
Meanwhile, Diwanji said the deposit rates have peaked in the system and the banks will not be doing any more deposit hikes as they were doing in the last few months to garner more funds.
It can be noted that there is a wide gap between the deposit growth and credit growth for banks, which has led to what some bankers call a 'war for deposits' since FY23.