The rise in bank deposits has quickly outpaced credit growth, causing concern for the central bank as depositors opt to park money in stocks and mutual funds for better returns amid high inflation.
Meanwhile, tight liquidity and rising loan demand have sparked a “deposit rate war” among lenders trying to attract more depositors.
state Bank of IndiaThe country’s largest lender by assets on Tuesday hiked all term deposit rates by 15-100 bps, while smaller private sector counterparts Kotak Mahindra Bank Fixed deposit rates raised to 7%.
Macquarie Research called slowing deposit growth a “worrying concern” and sees banks’ margins rising in the third quarter as deposit growth is well below loan growth and deposit rates rise sharply.
Deposit growth in Indian banks was 9.6% year-on-year in the fortnight to November 18. latest central bank data showed, while loan growth stood at 17.2%.