Banks are to increase deposit rates as credit grows fast

Indian banks may increase the deposit rates for domestic savers. The bank needs to increase this to collect more cash from fresh deposits. this cash is then to be utilized to lend money to the borrowers to expand the economy. It is observed from the collected data that from every 100 Rs. Collected by the bank in deposit, the bank used to lend Rs.122. So it is important for the banks to increase their shares od deposit so that they can meet the credit demand. It is also analyzed from the data that the fresh deposits to investment ratio have fallen down 31% of what it used to be 100 years ago. Furthermore, RBI has also indicated a gap in between the credit-deposit growth. So banks are more reliant on the borrower demand of credit. said B Prasanna, group executive and head of markets, ICICI Bank. It is also said by  B Prasanna, group executive and head of markets, ICICI Bank that “The increasing wedge in the credit-deposit growth… is leading to an increase in the market rates for the wholesale deposit even as moderation in the G-sec yields has happened last month,”.

Furthermore, wholesale deposit rates have also increased about 75-100 bps in the last six months. And this upward movement in the rates of deposit led to an increase in MCLR of the various bank.