Banks likely to inflate deposit rates

Deposit ratesIn response to the overpowering credit growth as compared to deposit growth in the current Financial Year (up to March 15, 2019), banks are planning to raise their deposit rates to attract deposits.

As per the available data, lenders have witnessed a credit growth of 14.33 percent while the deposit growth was lagging behind at 9.97 percent.

In the fortnight that ended on March 15, banks credit witnessed a jump by Rs 35, 223 crore. In complete contrast to thus, deposits with lenders slipped by Rs 2,893 crore during the same period.

In the last one year, while the deposit rates of the banks witnessed a slugged response, the one-year marginal cost of funds-based lending rates of lenders went up by around 40 basis points.

According to the Reserve Bank of India data, term deposits which at 6.25-6.75 percent a year ago has moved to 6.25-7.50 percent band as of March 15. Since interest rates on deposits have not witnessed any positive response in step with lending rates, it is expected that banks will most likely increase deposit rates to garner resources to support credit growth.

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