The pressure to garner deposits saw rates inching up in September – the first time since the Reserve Bank of India (RBI) began its rate cut cycle in February.
According to RBI’s monthly data, the weighted average rate on fresh rupee term deposits of scheduled commercial banks have inched up by 4 basis points (bps) on month, with rates of public sector banks up by 3 bps while private sector was up 2 bps.
Analysts believe that with credit growth picking up, deposit rates seemed to have bottomed out. “The rates on fresh deposits seems to have bottomed out unless there are further cuts in repo rates or a slowdown in credit growth,” Anil Gupta, senior vice president and co-group head of financial sector ratings at ICRA said.
At the same, RBI’s 100 bps rate cut is being reflected in the continuous fall in the lending rates. Interestingly, the transmission has been to the tune of 90 bps since the beginning of the rate cut cycle. The weighted average lending rate (WALR) of fresh rupee loans of scheduled commercial banks stood at 8.50% in September, lower by 24 basis points on month.
The WALR for public sector banks were down by 25 bps on month to 7.80% and for private sector banks were down 10 bps on month to 9.34% in September, data showed.
The credit growth of banks increased to 11.45% as on October 17 from 11.38% the previous fortnight, while deposit growth slowed down to 9.51% from 9.9% a fortnight ago.
“Few banks were running special deposit schemes for certain tenors with slightly higher than normal fixed deposit rates in September which is likely to have caused this month-on-month increase,” Karan Gupta, head and director, financial institutions, India Ratings said. He believes that this would have been done to meet asset-liability mismatch requirements in certain buckets and to shore up quarter end deposit growth numbers.
The weighted average term deposit rate on outstanding rupee term deposits of scheduled commercial banks was 6.82% in September as against 6.87% in August.
On the outstanding rupee loans, the WALR of scheduled commercial banks declined to 9.26% in September from 9.32% in August. The one-year median marginal cost of funds-based lending rate of SCBs moderated to 8.55% in October from 8.60% in September.
(with inputs from Christina Titus)