The bankers association of India, IBA has expressed its view that lending rates need to go up sooner or later. Decline in growth of deposits can be said to be a reason for the former.

According to Indian Banks Association Deputy Chief Executive Officer, K Unnikrishnan, inspite of the fact that the tight liquidity condition has been relaxed to quite some extent, but there has been a decline in deposit growth in the industry.

The decline has been more severe after the recent policy rate hike by RBI.

"The rate of growth of deposits has been coming down by one to two per cent to around 17 per cent in recent weeks from 19 per cent this time last year," Unnikrishnan said.

He added that with most banks increasing deposit rates after the policy rate hike, there has been a rise in the cost of deposits of banks. So lending rates need to be raised from the beginning of October.