Banks Chase The Rich As Deposit Growth Continues To Falter

Indian banks are taking a leaf out of the books of their foreign peers and are targetting affluent Indians to address deposit woes.

Affluent banking, also known as wealth banking, offers banking products, and a wide range of financial consulting services to wealthy clients.

"Deposits from non-residential Indians would be the fastest growing for us," said Samir Dewan, head, affluent banking and international business at IndusInd Bank Ltd. "We used to be 1.3% about three years back and we are 3.5% of the overall market share today," Dewan told NDTV Profit in an interview.

While the bank's affluent segment deposits grew 23% year-on-year to Rs 54,679 crore as of June 30, its non-residential deposits rose 33% to around Rs 50,000 crore.

IndusInd Bank is one of the new entrants in the affluent banking space. Currently, lenders including State Bank of India, HDFC Bank Ltd., ICICI Bank Ltd., Axis Bank Ltd., Kotak Mahindra Bank Ltd. and Yes Bank Ltd. offer such services to attract high net worth individuals.

According to Dewan, customers under the affluent banking segment have incomes ranging between $100,000 to $5 million. This range is increasing at a compounded annual growth rate of 14-15%.

This has come as India's economic growth is increasing rapidly, leading to higher number of high-net-worth individuals demanding specialised financial services.

IndusInd Bank has about 2 lakh individual clients in affluent business and 2,000 clients in private banking. The bank plans to take its affluent clients to 2.5 lakh within the next year and the base of private clients to 10,000, Dewan said. The bank currently has 800-900 relationship managers to achieve this.

So far, the lender has about nine pioneer branches and plans to take it to 20 by the end of this financial year, Dewan said. These are branches specifically cater to affluent customers.

Last week, State Bank of India's newly appointed Chairman, CS Setty, said that the bank has already rolled out 2,000 relationship managers for its premier banking services.

"I’m not talking about wealth. Wealth is a combination of banking and as well as financial services products, but these premier customers are only looking for banking services and they have a significant value with us," Setty told NDTV Profit in an interview.

Wealth banking has great potential at SBI and there is great demand for wealth product and services from non resident Indians, he said. The bank will establish wealth hubs both in Dubai and Bahrain, he added.

Last month, Axis Bank announced its partnership with Visa to launch 'Primus'—an ultra premium credit card, which will be offered by invitation to select high net worth Axis Bank customers.

"One of the key focus areas in our strategy is the premiumisation of our client portfolio to accelerate the bank's growth," said Arjun Chowdhry, group executive and head of affluent banking, retail payments at Axis Bank, at the launch.

Axis Bank's private banking business—Burgundy Private—is also strategically expanding its wealth management services to 15 new cities in India, taking its total to 42, the lender said in a press release.

These will be catered to tier-2 markets in locations such as Bhubaneswar, Patna, Raipur, Agra, Ghaziabad, Jodhpur, Udaipur, Jalandhar, Meerut, Belgaum, Kozhikode, Thiruvananthapuram, Aurangabad, Nagpur, and Gandhidham.

However, some experts argue that there is no link between banks moving to affluent banking as deposit mobilisation is not taking off.

"Banks will have to do a fine balance...scale up their own balance sheet by increasing deposit size in their near-term or distributing wealth management products," said Karthik Srinivasan, group head financial sector ratings at ICRA. "Its always going to be a trade off for them."

Rohit Bhasin, president, head affluent, non-residential Indian, business banking and chief marketing officer at Kotak Mahindra Bank, also echoed the view.

"Rather than chasing deposits, we are working towards a more holistic approach...we want to be the customers' best financial partner and in doing so we strive to get a higher share of their wallet and not just deposits," Bhasin said.

Currently, Kotak Mahindra Bank has about 4% market share in affluent banking and it is also one of the first few entrants in this space.

Banks are currently struggling to find ways to boost their deposit growth, amid a historic gap between asset and liability growth.

As of Aug. 23, the scheduled commercial bank's non-food credit was Rs 169.20 lakh crore, up 13.6% on the year, according to RBI data.

Deposits totalled Rs 213.2 lakh crore, up nearly 10.8% on a year-on-year basis. This compares to a deposit growth of 13.2% in 2023.