While banks have been quick to increase their lending rates after the Reserve Bank of India increased the repo rate by 90 basis points since May this year, transmission to deposit rates has been slow.
Banks increased the external benchmark-based lending rate (EBLR) by 50 basis points in June; 25 out of 33 domestic banks increased their term deposit rates in the range 3-38 basis points.
As credit demand picks up, banks will have to raise deposits at higher rates to meet the demand.