Bet’s loan, deposit rates may fall only next fiscal

Those contemplating taking a loan would do well to wait at least until April, for it is unlikely the lending rates will come down any sooner, believe bankers.

Also, for those with a surplus to park, this may be a good time to lock in the fixed deposits as the current high rates may not be available next fiscal.

“After the last policy hike, there was no increase or decrease in lending and deposit rates. Chances are bank deposit and lending rates will remain roughly in the range they are. But it is unlikely they will start coming down before perhaps the first quarter of the next financial year,” Paresh Sukthankar, executive director, HDFC Bank said in a conference call on Wednesday.

Several bankers believe there would be one more round of hike in lending and deposit rates this fiscal, particularly if the Reserve Bank of India (RBI) hikes key policy rates again. As such, banks had not passed on the last hike effected by the RBI in repo rate — the rate at which banks borrow funds from the central bank — in its September monetary policy review.

“If policy rates go up by 25 basis points in the monetary policy review this month, there is a chance lending and deposit rate increases will happen. The rise will be 25 basis points,” said Jaideep Iyer, senior vice-president, Yes Bank.

But this might well be the last time the RBI effects a hike this fiscal, believe bankers.

“Once there is a pause in rate hikes, in a couple of quarters, lending rates will start moving down. That may be possible in the first quarter of next fiscal,” said N Seshadri, executive director, Bank of India.

To the lenders’ disappointment, credit growth has been slowing.

For the fortnight ended October 7, bank credit rose 19.45% year on year and 1.35% over the previous fortnight at Rs41,48,597.55 crore, data released by the RBI on Wednesday showed. On the other hand, deposits were up 17.36% year on year and 1.71% over the previous fortnight at Rs56,24,931.8 crore.

“High rates have impacted growth. We had anticipated 21% credit growth. We have seen some deceleration already. Now we need to see how the third and fourth quarters emerge. But, overall, there may be a subdued growth than what we had expected,” said Seshadri.

Suresh Ganapathy, head of financial research team, Macquarie Securities seemed to concur. “In a scenario where growth is slowing down, there is no need for offering high rates in deposits since loan demand is coming down. Currently, deposits are healthy and loan demand is slowing.”