of 9.6% and leading to a fall in
credit-deposit ratio for the banking system.Reserve Bank of India data showed that this is the highest deposit growth print seen so far in this fiscal, while credit growth remained in single digits since May. The credit deposit ratio stood at 77.84% as compared with 79.39% a year back.
There has been a spurt in
fixed deposit mobilisation by banks in the past 30 days to June 13, possibly because depositors wanted to park their idle funds with banks at higher rates anticipating deposit rate cuts.
However, it would be a challenge for banks to keep the growth momentum going as lower deposit rates would discourage savers to put their money in banks. They would instead look for other avenues like mutual funds to maximise return, analysts said.
The government has so far kept the interest rates on public provident fund, post office savings schemes, sukanya samriddhi yojana and the senior citizens savings scheme unchanged. These rates will however be reviewed on June 30.
RBI lowered the repo rate by a hefty 50 basis points on June 6, following which banks across the spectrum started to reduce deposit rate. This is the third policy rate reduction by the central bank in a row, making the repo rate a cumulative 100 bps lower to 5.5% than what it was at the beginning of the year.The central bank began the rate easing cycle in February, cutting the policy rate by a quarter percentage point for the first time in five years.Meanwhile, banks' credit grew 9.6% year-on-year as of June 13, as compared with a 9% year-on-year expansion recorded a fortnight back, as the lower repo rate immediately brought down repo-linked lending rates, possibly impacting the credit demand positively. The credit growth however remained single digit due to circumspect economic scenario amid geo-political turmoil in the miidle east.
