Emphasis on attracting more deposits than making loans costlier, RBI starts raising interest rates in 2022
The figures from the last year are showing that this time there is more emphasis on making deposit schemes attractive from the banks. The latest RBI data shows that between May 2022 and June 2023, an average increase of 231 basis points (2.31 percent) in deposit rates has been done by banks to accept new deposits from the general public.
In May 2022, RBI started the process of increasing the interest rates and so far the repo rate, which plays a major role in determining the interest rates, has been increased by 250 basis points (2.50 percent). Generally, the effect of an increase in the repo rate is more on the loan rates, but its effect is also visible in the fixed deposit schemes of the banks.
The figures from the last year are showing that this time there is more emphasis on making deposit schemes attractive from the banks. The latest RBI data shows that between May 2022 and June 2023, deposit rates have been increased by an average of 231 basis points (2.31 percent) on behalf of banks to accept new deposits from the general public, while new loans This increase in rates is 1.83 percent.
This phase of change in interest rates is still going on. And now banks have started raising loan rates more than deposit rates. This figure of RBI has come when preparations are going on for another meeting of the monetary policy-setting committee next week (08-10 August). Most experts are telling that in this meeting to be chaired by RBI Governor Dr. Shaktikanta Das, it will be decided to keep the interest rates at the current level. RBI has decided to increase the repo rate by 2.50 basis points between May 2022 and March 2022.
Interest rates are also being increased in other countries of the world. Inflation remains a major problem in all the major economies of the world and to reduce it interest rates are being increased by the central banks. From the figures related to India, it seems that in the beginning, to increase the bank deposits, more interest was given by the banks on the deposit schemes, but now the focus of the banks is to make the loan costlier.
One reason is being told that despite making the loan costlier during the last year, there has been no reduction in the bank loan. Banking credit has seen a growth of 14.2 percent till July 14, 2023. During this period, an increase of 12.3 percent has been registered in the amount deposited in the banks.