The latest policy rate increase by the Reserve Bank of India in monetary policy review has produced a confusion whether the interest rates on deposits and loans would also go up or not.
But the bankers have said that the interest rates will not increase before October as credit growth has not gone up yet.
Also, it is anticipated that deposit rates may increase before lending rates as an enhancement on the slow increase of deposits.
Mr M.V. Nair, Chairman and MD, Union Bank of India, said that deposit rates would rise in order to benefit the savers.
He said, “Deposit growth is lower than the RBI’s projection. If it continues to be low, it cannot support the credit growth, which will pick up in the busy season. So, the priority at this point of time has to be deposit growth’.
Mr M.D. Mallya, CMD, Bank of Baroda said, the policy rate increase by RBI is a clear signal that there is an upward trend in interest rates.
He added, “It is also possible that deposit rates may go up first, and then the lending rates, subject to credit demand. A hike in rates may not happen immediately as we have just tweaked the rates”.
Mr D. L. Rawal, CMD, Dena Bank said, just deposit rates will increase by the start of October.
He said further, “Once credit picks up in the third quarter, we will have to up interest rates on term deposits”.
He added, “Given that credit growth has been lacklustre in the second quarter, banks may not revise the base rate. Status quo on the base rate will encourage credit growth during the festive season. Base rate, however, will get revised in the fourth quarter as banks will take into account the deposit rate hikes effected in the previous quarters.”