PSU bank Union Bank of India predicts deposit rates to increase from October, a senior official said.
Chairman and MD M.V. Nair said, “The liquidity is already under pressure with the advance tax payments outgo. Then from October, firstly, the busy season starts where the credit is expected to grow at a faster pace than the deposits”.
He said, “Secondly, in the third quarter, the redemption of the government securities are not there so liquidity would be under further pressure. So deposit growth has to pick up and if it does not happen, then from October the rates (on deposits) might go up.”
He added that for the industry in total, the deposits till now went up by 14.5% y-o-y, far below the Reserve Bank of India’s goal of 18%.
He said further, “On account of inflation, savers are getting negative returns on their deposits and hence deposit growth is not happening. Going by RBI’s indication of a positive return to savers, if this trend continues, deposit rates have to go up”.
The bank anticipates 25% loan growth and 22% deposit growth in 2010/11, he said.
He added, “Till last week, on a year-on-year basis, our credit and deposits grew by 23 percent and 21 percent respectively, which is higher than the industry average of 19.5 percent growth in credit and 14.5 percent growth in deposits.”
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