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After Lockdown 4.0; Surge In Bank Deposits Point To Lower Consumption

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As per the latest SBI Economic Research report after four phases of lockdown it has come to the fore that Indians have being cutting down on unnecessary expenses. There has been seen an uptick in deposits which point to reduced consumer's preference for consumption.

After Lockdown 4.0; Surge In Bank Deposits Point To Lower Consumption
 

Also, all through the lockdown there has been seen a persistent inclination to maintain liquidity as well as savings. And during the first lockdown phase that spanned from March 25 to April 14, deposits transaction in savings account increased to Rs. 5 trillion while in case of term deposits the transactions worth Rs. 1.76 trillion were reported.

At the same time, as business during the time was virtually at stand still, there was decline in current account deposit by Rs 62,757 crore. Also, businesses during this time took shelter in these funds to tide away the liquidity crisis.

"There was a decline in such bank deposits, but term deposit accrual was very healthy. The increase in deposits is also attributable to Government spending picking up pace with the hike in (ways and means advances) WMA limits," the SBI Research report, authored by its group chief economic adviser Soumya Kanti Ghosh, noted. Bank deposit growth declined during lockdown 2 highlighting cash need of depositors during this time.

It was in the lockdown 3.0 that deposits sharply receded lower. Though during this time, term deposits transaction value came in at Rs. 22845 crore. "The situation became critical during Lockdown 3 when such deposit growth turned significantly negative, indicating people may have used the initial build-up to start spending as they realized that lockdown could be a recurring phenomenon," the report noted.

"There has been an increase in deposits again, indicating that consumers are uncertain about spending and instead are saving much more in bank deposits. It is also possible that many households may have marginal propensity to consumption closer to zero because many types of spending are less available due to social distancing," the report stated.

 

And while India is under lockdown 5.0 there shall be continuing spurt in bank deposits as consumer savings will continue to go higher.

GoodReturns.in

Story first published: Thursday, June 18, 2020, 14:35 [IST]
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