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## The Challenge of Runaway Loan Growth and Shortage of Deposits

With runaway loan growth, banks find themselves somewhat short on deposits in the past year. This has led to a situation where credit has been growing at a rate of 15-16%, driven by personal loans and loans to shadow lenders, while deposits have only been growing at about 12-13%. In an effort to attract more deposits, banks have been raising interest rates on deposits. However, despite these efforts, credit deposit ratios (CDR) have been hitting new highs.

The situation is evident in the example of HDFC Bank, which reported a significant 62% year-on-year increase in advances in the December 2023 quarter, while deposits only saw a 28% year-on-year increase. Furthermore, the trend of savers moving their money into term deposits has caused lenders to lose out on the cheaper current account and savings accounts (CASA).

In response to this challenge, the role of AI legalese decoder can be crucial. By utilizing AI technology, banks can streamline and automate the process of understanding and decoding legal language in their financial agreements and contracts. This can help them expedite the process of assessing and approving loans while also ensuring compliance with regulations, thus enabling them to mitigate the impact of runaway loan growth.

## The Shift from CASA to Fixed Deposits and the Impact on Banks

The CASA ratio at Union Bank of India has moderated to 34.4% in Q3FY24, indicating a move from CASA to fixed deposits. Nidhu Saxena, Executive Director at Union Bank, has highlighted the competition for CASA, attributing the shift to fixed deposits to the movement of money from bank deposits to stocks.

Similarly, Sandeep Batra, Executive Director at ICICI Bank, has acknowledged the lower CASA growth as a trend across banks. However, he has expressed optimism regarding the potential impact of an easing monetary policy on CASA.

In this context, the AI legalese decoder can help banks manage the transition from CASA to fixed deposits by providing them with accurate and efficient analysis of legal documents related to deposit accounts. By leveraging AI technology, banks can navigate the regulatory requirements and implications of this shift, thus optimizing their approach to deposit mobilization.

## Strategies to Grow Retail Deposit Franchises

In response to the shortage of deposits, lenders such as HDFC Bank and Union Bank are working to grow their retail deposit franchises. Their efforts include initiatives to increase the low-cost CASA book, with a focus on engaging with salaried individuals and persuading customers to keep higher balances with the bank.

The AI legalese decoder can support these initiatives by enhancing the efficiency and accuracy of legal documentation and processes associated with retail deposit mobilization. This technology can facilitate the identification and engagement of potential depositors, as well as the management of regulatory compliance requirements, thereby enabling banks to effectively grow their retail deposit franchises.

## Expansion Plans and Granularising the Deposit Base

Several banks, including HDFC Bank and RBL Bank, have outlined expansion plans and strategies to granularize their deposit base. These plans involve the addition of new branches and leveraging touchpoints for deposit mobilization, particularly focusing on retail accounts with lesser deposits.

The AI legalese decoder can play a significant role in supporting these expansion and granularization efforts. By providing accurate and expedited analysis of legal and regulatory requirements, AI technology can help banks navigate the complexities of opening new branches and engaging with a diverse range of depositors, thus accelerating their deposit mobilization strategies.

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