No investors for higher rate FDs

After the Reserve Bank of India raised its key rates on July 27 the banks started raising their fixed deposit rates but in the 15 days to August 13 there has been no improvement in the growth of the deposits.

According to RBI data deposit growth has declined by Rs Rs 8,016 crore in the fortnight to August 13 to a total outstanding of Rs 46,39,595 crore, translating into a year-on-year growth of 14.1 per cent.

RBI in its monetary policy meeting with bankers had expressed its concern over low deposit growth and had told banks to improve their deposit mobilization to avoid any asset-liability mismatch as a result, banks getting signal from RBI raised interest rates on short-and medium-term fixed deposits by as much as 1.5 per cent.

Although, in the 15 days ended August 13 after a temporary decline last fortnight bank credit growth has moved up to 20 per cent mark.

As per RBI data, banks have witnessed credit growth of 20.13 per cent on year-on-year basis at the end of the fortnight. Thus, outstanding bank credit amounts to Rs 33,57,265.34, as against Rs 28,05,224.26 crore at the end of the previous fortnight.

However in the first quarter of the financial year banks credit growth had spiked when telecom firms demanded for the 3G and Broadband Wireless Access spectrum auctions. But bankers are hoping of moderate credit growth in the current quarter. The apex bank had predicted 20 per cent growth in credit for the current financial year.

Many banks have increased their benchmark prime lending rates with an aim to persuade more customers to switch to base rate system. From July 1 banks have introduced base rate system, but till now the customers have not switched to base rate.