Bank Fixed Deposit: According to SBI Research, there will be large pressure on bank deposit rates to go up if certain numbers fructify in FY 2022-2023.
Soon, there may be huge pressure on bank deposit rates to go up. According to SBI Research, there will be large pressure on bank deposit rates to go up if certain numbers fructify in FY 2022-2023.
“In FY22, small savings collections exceeded the budgeted amount by a large Rs 2 lakh crores, and that had resulted in net borrowing falling short by Rs 1.7 lakh crores. The challenge lies in FY23 with net borrowings increasing by Rs 4.1 lakh crores and small savings supposed to be lower by Rs 1.7 lakh crores than the revised FY22 amount. If this numbers in FY23 fructify, there will be large pressures on bank deposit rates to go up given that small saving rates are already much higher than bank deposit rates,” SBI Research said in a report today (Monday, 7th Feb, 2022).
The Central Government has not revised small savings schemes rates since Q1FY21. However, the Reserve Bank of India (RBI) has reduced key policy repo rate by 115 bps to 4.0 percent and Reverse Repo Rates by 155 bps to 3.35 percent. With this, banks have also reduced their interest rates (both deposits & lending) significantly, the report noted.
The average lending rates of banks have declined by 99 bps and weighed average domestic term deposit rates have decreased by 132 bps during March 2020 to December 2021.
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Recently, banks like HDFC Bank and ICICI Banks have raised their fixed deposits rates for several tenors.
According to the report, the incremental credit deposit ratio currently stands at 140 indicating sooner than later there is a need to increase the deposits rate to garner more durable liquidity in terms of bank deposits. “A delay in raising deposit rates may result in a large incremental increase in later point of time,” it said.
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