rate last month and target CPI inflation would help lower the CD ratio.
"The central bank's decision to raise the repo rate and possibly target CPI inflation is expected to narrow negative real rates and spur deposit mobilisation," the report said, adding that it sees another 50 bps (0.5 percentage point) hike in the repo rate before the end of the fiscal.
The likelihood of pegging the next tranche of inflation- indexed bonds to retail inflation, rather than WPI, will also be timely, the report said. "The attractive and positive, if inflation eases, real returns could also help channel interests back into financial savings."
Down the line, pick-up in deposits will thaw liquidity conditions, helping to calm borrowing costs, the report said.
"This positive chain of developments, however, is contingent on other domestic and global factors as well and unlikely to pan out in the near-term."
DBS sees banks to raise lending rates first before the deposit rates, thus delaying the transmission process.