Bank Deposits Surge by ₹7 Lakh Crore in a Fortnight; Third Highest Jump in 29 Years

The domestic banking sector has witnessed an unprecedented influx of capital, recording a historic surge in deposits in just a fortnight. According to the latest report released by public sector giant SBI Research, a staggering ₹6.97 lakh crore in new deposits was infused into the banking system during the 15 days ending June 30 of this year. The report highlighted the magnitude of this event, noting that this marks only the third instance in the last 29 years of Indian banking history where deposits have escalated at such a massive scale within such a condensed timeframe.

Quarter-End Factors and Foreign Capital Inflows
Multiple macroeconomic factors have contributed to this massive liquidity boost. One major driver was the conclusion of the first fiscal quarter at the end of June, which traditionally prompts corporate entities to park their excess funds in bank deposits. Additionally, substantial capital generated through foreign currency deposits and External Commercial Borrowings (ECBs) heavily bolstered the overall deposit figures. This massive influx of funds is expected to completely resolve the recent cash deficit faced by commercial banks, thereby significantly easing overall market liquidity. As a direct result, SBI Research explained that banks will face a reduced dependency on borrowing funds at higher interest rates from the open market through Certificates of Deposit (CDs).

Surging Foreign Exchange Reserves and FII Investments
A crucial element driving this financial momentum is the aggressive influx of Foreign Institutional Investments (FII) into the Indian market, spurred by the government’s proactive policy initiatives designed to attract global investors. During this quarter alone, the market witnessed fresh foreign fund inflows amounting to $7 billion, with the total volume of foreign capital inflows estimated to reach around the $15 billion mark. Concurrently, this immense cross-border liquidity movement has also strengthened national financial buffers, with the report noting that the Reserve Bank of India (RBI) saw its foreign exchange reserves increase by an impressive $4.4 billion during this period.