Banks hint at slower pace of deposit rate hike even as lending rates go up

These banks have said they have enough ‘space’ in terms of liquidity to continue for another quarter or two without worrying about raising funds via deposits at higher rates.

Published: 08th November 2022 07:49 AM  |   Last Updated: 08th November 2022 07:49 AM   |  A+A-

PSB, PSU, banks

Image used for representational purpose only. (File Photo)

Express News Service

NEW DELHI:  Even as banks have fully passed on the impact of repo rate hike since May this year to borrowers, they have hinted at a slower pace of increase in deposit rates. Management of large PSU banks -- State Bank of India, Bank of Baroda (BoB) and Punjab National Bank -- have recently hinted they have sufficient liquidity, and they may go slow on raising deposit rates.

These banks have said they have enough ‘space’ in terms of liquidity to continue for another quarter or two without worrying about raising funds via deposits at higher rates. Sanjiv Chaddha, MD and CEO, BoB, in an analyst call after Q2 results said the bank has a domestic credit-to-deposit (CD) ratio of 73% ( which means only 73% of the deposit raised has been deployed as loans), and so the bank has little scope for allowing loan portfolio to grow at a faster rate than deposit rates.

The RBI has raised loan rates by 190 basis points since May this year. While banks have fully passed on the impact of repo rate hike to borrowers, they have been slow in passing on the benefit to depositors.
For example, SBI recently said that it has hiked the deposit rates by 80 bps but fully passed on the impact of repo rate hike to borrowers.

Banks have seen their loan portfolio grow at a much faster rate than deposits in the current financial year. SBI’s loan portfolio has grown at 21% in the second quarter of the financial year compared with 10% growth in deposits. BoB has seen its deposit rates grow at 14% compared to 21% growth in the loan portfolio in the September quarter. BoB’s Chadda said the bank’s cost of deposit has remained the same in the first half of the financial year. 



Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp