Weak Household Savings Weigh on Bank Deposits, Threaten Profitability: Report

• India's banking sector faces pressure from weak deposit mobilization despite healthy loan growth, driven by sluggish household savings and muted low-cost deposit growth.
• Household deposits, nearly 60% of total, grew 10% year-on-year, with growth tilted towards term deposits over savings accounts (CASA).
• Public banks have lost deposit market share to private lenders; non-individual deposits are growing faster but are higher-cost and less stable, increasing funding risks.
• Deposit mobilization is stronger among customers over 60, with working-age groups lagging, reflecting subdued income growth and consumption pressures.
• Kotak Institutional Equities predicts limitations in banks' net interest margins (NIMs) due to the weak funding environment and intense competition for deposits.

Why It Matters: Weak household savings threaten bank stability and lending capacity.