According to the Reserve Bank of India's (RBI) latest report the total deposits of banks have dipped by Rs. 4,997.08 crore to Rs 45,26,220.20 crore as on May 21, 2010 as compared to Rs 45,31,217.28 crore registered on May 7, 2010. The RBI estimation takes into account the resources needed to meet credit offtake by the private sector and government borrowings along with growth and inflation outlook.
However experts believe the decline may end soon. Indraneel Sen Gupta, economist in BoA Merrill Lynch, says, “We expect a bottoming out by September (and the figure could touch) to 18.2% by March 2011.”
According to Mridul Saggar, chief economist, Kotak Securities, at present bank deposits growth is below comfort levels. Referring to the RBI projection made during the annual monetary policy review, Saggar said, “If this continues, the full-year target of 18% won’t be reached.”
Moreover the government borrowings are high this year, credit growth is also expected to be higher than last year at 20%.
“Interest rates on deposits are too low now and in some time banks would have to consider their sources of funds and take a decision on deposit rates so that they are in a position to meet credit growth targets,” said Saggar.
Thus Sen Gupta believes banks will be hiking deposit rates by September.
OP Bhatt, chairman and managing director, State Bank of India,India’s largest commercial bank, said that banks will hike their deposit rates because banks will need money to meet credit demand. However Union Bank of India has already raised its interest rates on bulk deposits for 1 year to 6.5% from 6% earlier.
S Govindan, general manager, Union Bank of India said, “We revised the rates on bulk deposits for 1 year in line with the certificate of deposit rates.”
In mid-April the bank hiked its retail deposit rates to 7.5% for 5 years, 7.25% for 3 years and 6.5% for 1 year.
“We are continuing with these rates for now and will take a call when markets start showing signs ofliquidity crunch,” said Govindan.
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2 comments:
USeful information. Thanks for the update, I'm looking for fixed deposit interest across banks. Let me glance the below posts.
Thanks again.
Would rise in fixed deposit rates imply an equivalent rise in mortgage rates as well?
Would it not be better to be move ones money in stock (indexed ETFs?) in such inflationary environment since stocks generally outperform during inflationary times.
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