Deposit Rates are not likely to increase

By | September 27, 2011

According to a recent press report, the increase in the Repo Rate may not result in increase in the interest rates for Fixed Deposit. A report said that the banks will revise the interest rates for deposits once the central Bank makes changes in the repo rate.

Reports said that the RBI has increased Repo Rate several times for the past 18 months and the Banks have already increased the interest rates so it might not increase the rates any further. Right now the interest rate is 5 percent to 8.50 percent for term deposits between 46 days to 60 days and for deposits from six months to five years is 8 per cent and 10.50 per cent.

There are certain reasons for low deposit rate hikes such as , the sluggish growth in the net interest income and net interest margins which decreased the credit growth of the bank, the second is the decrease in the corporate investment by bank, the third is the continuous investment by the bank also decreased.

So, the banks concentrate more on the Retail sector in order to push up their position, they give some special offers to attract the customers, additionally the bank gives concession and incentives to increase the cost of funds.

Further increase in the deposit rates will affect the banks, so the interest rates the customers pay for their borrowings may go high but the deposit rates will not increase. The hike has made the loan borrowers to be uncertain about taking up loans.

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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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