According to a report from Deutsche Bank Securities, many state-owned banks have started cutting their dependence on bulk deposits, but a significant amount is still pending and should be realised over the coming quarters.

   This follows government dictate to banks to reduce their reliance on wholesale funds. The report expects public sector banks (PSBs) to reduce bulk deposits worth Rs 300,000 crore ($55 billion) over the next few quarters.

   However, industry sources feel that reducing bulk deposit is fraught with challenges. First, the immediate replacement of bulk money with low-cost funds — current and savings account (Casa) deposits and term deposits is tough. Second, cutting down bulk money might moderate the pace of overall deposits’ mobilisation, a situation banking regulator may not be happy with.

   It is learnt that the share of these deposits grew significantly when banks were nudged to step up lending for big-ticket infrastructure projects. They had to resort to raising high-cost volatile bulk money, as it was difficult to raise amounts from retail route in short span.

   Deutsche Bank said it was practically not possible to shed such a big proportion. But if they were renewed, they would not be renewed at rates above retail deposit rates. Most high-cost deposits might get repriced around 150-200 basis points lower than 2011-12.