Effect of increase in interest rates on bank deposits, banks raised more than 4 lakh crores in 15 days

Bank Deposit Rate Hike: In November, RBI Governor Shaktikanta Das expressed concern over the decline in deposit growth compared to loan demand in a meeting with managing directors and CEOs of public sector banks and private banks. . Banks also had to bear the brunt of this when there was a cash crunch in front of the banks. Banks started raising interest rates on deposits to meet the demand for loans. The effect of this decision of the bank has started showing. Due to increase in interest rates on deposits, banks have succeeded in attracting more than Rs 4 lakh crore deposits in just 15 days.

For the last several months, the gap between the credit and deposits of the banks was increasing. All the figures were being released which were indicating that the deposits are not coming to the banks as much as the demand for loans. If this continues like this, there may be a shortage of cash with the banks to give loans. This shortfall was also because after increasing the repo rate of RBI, banks did not increase the interest rates on deposits at the same speed at which the loans became costlier. In 2023, banks were forced to increase the interest rates on deposits. Banks are now offering interest rates on deposits from 8 to 8.50 percent, while small finance banks are offering interest rates on deposits from 9 to 9.50 percent.

RBI increased the repo rate from 4 percent to 6.50 percent in one year. But the banks were not increasing the interest rates on deposits. In such a situation, investors were investing in mutual funds for better returns. Even the small savings schemes of the government were getting better returns. The credit-deposit ratio had shot up to 69 per cent in the last several months. But the banks succeeded in increasing the deposits, after which this ratio has come down to 75 per cent. Deposits in banks have been Rs 184.5 lakh crore in the first fortnight of this year, which is 10.2 percent more than the same period last year. Credit has also been Rs 138.5 lakh crore with a growth of 15.7 percent during this period.

The pressure on banks to increase deposit rates also increased because Finance Minister Nirmala Sitharaman announced a special deposit scheme for women in the budget. The Finance Minister announced a deposit scheme for women named Mahila Samman Savings Certificate. Under this scheme, only 7.5 percent annual interest will be given on deposits of two years’ duration. The Finance Minister has doubled the investment limit in the deposit scheme for senior citizens from Rs 15 lakh to Rs 30 lakh, not only for women but also for senior citizens, which earns an interest of 8% per annum. After this announcement by the Finance Minister, the pressure on the banks to make their deposit schemes attractive increased.

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