Prompted by key rate revisions by the Reserve Bank of India (RBI), private sector banks seem to be gearing up for a deposit rate hike.
According to private banking sources, it is widely expected that the private banks would go for such rate hikes in the near term before they change their base rates, impacting their lending rates.
Offering higher rate of interest on term deposits will also help these banks to mobilise more funds to meet the credit demands in the system, fraught with liquidity crunch.
Said Ashish Parthasarathy, treasurer at HDFC Bank, ?After the recent hike, RBI is expected to increase both repo and reverse repo once again by 25-50 basis points in the next monetary policy. Banks are expected to raise their deposit rates soon.? Any hike in deposit rates will help the banks to meet the deposit growth target, he added.
The banks have seen a dip in the growth of deposits in recent times. Deposits with banks rose 13.92% for the fortnight ended June 18, as against 14.34% y-o-y in the previous fortnight.
?Our asset liability committee will review the interest rate situation in its July meeting. We are also keeping a close watch on what other private banks are doing to stay competitive,? said PC John, executive director, Federal Bank.
RVS Sridhar, president & head markets (treasury), Axis Bank, said, ?Banks will increase deposit rates depending on their fund requirements for credit offtake. The system is currently going through a liquidity crunch.?