Bankers try to recoup lost mutual fund clients

Safe haven: Deposits ensure safe returns while customers risk losing money if markets correct. G
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Bankers have called for the development of innovative products to reclaim deposit customers who have moved to the equity market. They cautioned that while deposits ensure safe and periodic returns, customers risk losing money if markets correct from current highs.

“I feel it (deposit mobilisation challenge) is more of a transient and not a structural issue at this point. At the same time, we as a bank typically need to figure out how to address the change of preference happening for savers,” said Debadatta Chand, MD and CEO of Bank of Baroda (BoB), at FIBAC on Thursday.

Mr. Chand said customers do not opt to open a savings account with a bank if the product is not bundled with other services or benefits. More customers prefer digital banking than branch banking. At BoB, Mr. Chand said that just like systematic investment plans (SIP) in mutual funds, the bank has launched a “systematic deposit plan” that offers modest returns.

Regulated returns

M.V. Rao, MD & CEO of Central Bank of India and chairman of the Indian Banks’ Association said banks cannot offer more returns to saving account customers as they are tightly regulated on the fund deployment. “The returns given by mutual funds is higher because the deployment of resources is regulated so tightly… and at every level, the end use has to be ascertained,” he said.

(The writer is with The Hindu businessline)