At a time when the banking industry is in a crisis globally, fixed deposits of public sector banks have emerged as the safest haven for the badly hit investors who are frantically liquidating their positions in equity markets and mutual funds.
While asset management companies have started feeling the heat as retail and corporate investors queue up to redeem their funds, branches of public sector banks have seen a rush for term deposits from investors who want to ensure there is no further erosion in their wealth.
The State Bank of India, the largest state-owned bank, which has launched a special 1,000-day fixed deposit scheme, has mobilized over Rs 5,000 crore across the country in just 12 working days. It is also witnessing huge inflow of money into other schemes.
The flight from markets to banks is not difficult to understand. From a peak level of 21,200 on January 10, 2008, the sensex has fallen almost 50%. During the same period, assets under management (AUM) of equity funds have dropped by 22%, while AUM of liquid funds has plummeted by around 44%.
As per the industry figure, around Rs 45,000 crore worth of funds have been redeemed in the month of September. Due to this many PSU banks are seeing infusion of funds, which are getting diverted from the stock markets. "Our term deposits normally grow at 17% annually. If the present trend continues, we could end up with 25 to 30% growth," said a top official of Bank of Baroda. "Our deposit schemes are drawing funds diverted from the stock market," acknowledged H C Pattnaik, chief general manager, SBI Gujarat.
Source... TOI...
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