Possible rise of FD rates by September 2010
By Neelima Shankar
Jun 8, 2010
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The latest reports released by Reserve Bank of India indicated that there has been a dip in total deposits with banks on a fortnightly basis. The total deposits of banks dipped by Rs. 4,997.08 crore to Rs 45,26,220.20 crore as on May 21, 2010 as compared to Rs 45,31,217.28 crore registered on May 7, 2010.

However, experts suggest that the decline may soon end.

"We expect a bottoming out by September (and the figure could touch) to 18.2% by March 2011," said Indraneel Sen Gupta, economist in a BoA Merrill Lynch.

According to Mridul Saggar, chief economist, Kotak Securities, the present trend of growth in bank deposits is quite below the comfort levels.

"If this continues, the full-year target of 18% won't be reached," Saggar said making a special reference to the projections made by RBI in its monetary policy.

RBI projects not only a rise in the deposits with banks, but credit offtake is also expected to surge furthe ahead of last year's industry average.

"Interest rates on deposits are too low now and in some time banks would have to consider their sources of funds and take a decision on deposit rates so that they are in a position to meet credit growth targets," said Saggar.

According to O P Bhatt, Chairman of SBI, there is an upward bias regarding the deposit rates because banks are in need of money to meet the credit demand.

"We revised the rates on bulk deposits for 1 year in line with the certificate of deposit rates," said S Govindan, general manager, Union Bank of India.

"We are continuing with these rates for now and will take a call when markets start showing signs ofliquidity crunch," he added.



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