NEWS & ADVICE : SAVINGS ACCOUNTS
Interest rates on deposits may decline by 50 bps
By Neelima Shankar
Oct 25, 2012
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As Banks are aiming at increasing margins, the interest rates on deposits are expected to decline by up to 50 basis points.

A senior official from a private bank said, "There is a distinct possibility that banks may cut savings bank interest rates. The fact of the matter is if the whole interest rate structure comes down and you don't cut the savings bank rate, your margins would be impacted".

The credit growth has remain weak i.e. 15.9 per cent as on October 5 as compared top last year's growth of 19.5 per cent. Mr. N S Venkatesh, Chief General Manager and Head of Treasury, IDBI Bank said, "Banks need to reduce their cost of borrowings as there is not much loan offtake. If the Reserve Bank of India cuts policy rates, then about 50-75 per cent of it will be factored in the deposit rates as well".

Many banks like State Bank of India, HDFC Bank and ICICI Bank in order to protest the net interest margins, they have already reduced fixed deposit rates on retail term deposits.

Head of Treasury, HDFC Bank, Mr. Ashish Parthasarthy said, "The deposit rates have stabilized as of now. However, if the credit growth remains weak, deposit rates may further fall as banks need to reduce their cost of funds".

However, Bankers are now hoping of credit pick up in the coming two quarters. On October 5, bank credit increased to Rs 48.09 lakh crore and deposits to Rs 64.11 lakh crore.


 


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