Bank deposits plunge in Punjab

Chandigarh: Bank deposits seem to be losing attraction among people in Punjab despite alluring interest rates, with deposit mobilisation growth in the state shrinking to 7.5 per cent, compared with pan-India deposit growth of 18 per cent.

Most importantly, the deposit mobilisation has even turned negative in the urban sector (having over one-third share in total deposits) which means people living in industrialised cities like Ludhiana, Jalandhar are withdrawing their cash from banks and keeping it in other high margin investment options, bankers pointed out.

According to latest State Level Bankers Committee (SLBC) Report which was released today, the deposit accretion in the state went up by just 7.56 per cent to Rs 1.46 lakh crore for the period ending June 2011, against 10 per cent in the same period last year.

Significantly, the rate of deposit mobilisation by banks in the country is over 18 per cent and, moreover, in the neighbouring state of Haryana, the bank deposits grew by 22 per cent in the same period.

"The slow pace of deposit mobilisation indicates that people in Punjab prefer to invest in gold and real estate, which are offering much higher returns than that of bank deposits," a senior bank official said.

The real estate sector in potential areas of Punjab has given the returns to investors in the range of 30 to 40 per cent in last one year, while price of gold rose appreciably in the past one year and it is currently ruling over Rs 26,000 per 10 grams, experts said.

Bankers also attributed the lag in deposit mobilisation to slow down in the industrial segments, particularly textile.

"Trouble in textile sector caused by high rates of raw cotton is also one of the reasons of tight liquidity among the industry that resulted into low mobilisation of money," Punjab National Bank General Manager S S Bhatia said.

Though banks in urban areas saw deposits went down by over 6 per cent, the money supply from rural and semi urban centres shot up by 16.58 per cent and 17.38 per cent, respectively.

However, credit in the state expanded by 21.98 per cent to Rs 1.19 lakh crore as on June, 2011.

Punjab has banks branch network of 3,826 with maximum branches falling in rural areas.

Source: Financial Express