How banks' lending rates have gone up faster than deposit rates

In response to the Reserve Bank of India’s 250-bps hike in repo rate, term deposit rates have been raised by 100 bps by all scheduled commercial banks.

The lending rates have gone up faster than the deposit rates, since monetary transmission acts with a lag for the latter.

According to ICICI Securities, with the credit-deposit ratio at 75.3 per cent, this could put further pressure on deposit rates.

“All these factors indicate that deposit rates are likely to inch up further for banks,” ICICI Securities said.

The monetary policy committee of RBI is expected to lift the repo rate by another 25 bps on Thursday, taking the rate to 6.75 per cent. ­­­