Experts Says, RBI May Hike Rates in 2023 But Bank Deposit Rates Have Peaked

Experts Says, RBI May Hike Rates in 2023 But Bank Deposit Rates Have Peaked

Bank deposit rates might be coming close to their peaks, with the likelihood of further increases possibly limited only to selected tenures, while the central bank thinks about increasing the rate of the policy at least once in 2023.

The chief executive of a south public sector bank stated that There will be an increase in the rates of deposit here and there by some basis points as the growth of credit continues. However, the rates of deposits to a large extent have reached nearing peaks. 

One basis point is equal to 0.01%.

In accordance with the Reserve Bank of India’s (RBI) monetary policy committee member Rajiv Ranjan, without a doubt, lending and deposit rates in actual terms are very much lower than the pre-pandemic levels. 

According to the chief economist of Bank of Baroda Madan Sabnavis, firstly, there is room for an additional increase because the Reserve Bank of India (RBI) is expected to raise rates one more time in February.

Secondly, while the rates will be increasing, it will be particular across certain tenures and not across the board.

The chief economist of the Bank of Baroda explained further that some maturities only see a raise when the bank needs more funds.

In spite of the space in deposit growth and credit growth, the deposit rates are not likely to increase across the board in the coming future. 

The separation between credit growth and deposit growth is mainly because of the base effect. 

It was stated by RBI Governor Shaktikanta Das.

Shaktikanta Das also commented during the last policy meeting that the growth of the deposit is on a high base whereas the growth of the credit is on a low base. This is the reason why there appears to be divergence between the two. 

During the very first fortnight of December, bank loans increased 17.4 % year on year to Rupees 132 lakh crore on the other hand bank deposits rose 9.4% year on year to Rupees 174 lakh crore.

Interestingly enough, the growth of credit for all categories almost was left behind the growth of the deposit when taken from the pre- Covid that is as of March 2020, as shown by the CareEdge rating report. 

During the period of May to October 2022, the weighted average lending rates on fresh and outstanding rupee loans increased by 117 basis points (bps) and 63 bps, respectively.

During the same time period, the weighted average domestic term deposit rate increased by 150 basis points. Deposit rate increases only affect new deposits and renewals. Since April of last year, the RBI has raised repo rates by 225 basis points.

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