Crisil expects steep hike in bank deposit rates

According to leading domestic rating agency Crisil, banks would likely steeply hike their deposit rates in the second half with lenders expecting a strong credit growth revival during the rest of the year.

Noting that the response of the bankers to the steady tightening of monetary steps by the Reserve Bank has been measured and gradual during the first half of the year, Crisil expects the hikes to be sharper in the second half and says this may be accentuated if the Central Bank effects any further hike in the second half.

Crisil Ratings head Suman Chowdhury said today that Crisil believed credit offtake would be substantially higher in H2 as the credit demand was by nature back-ended in our country given the festive and agricultural harvest seasons in the second half. He added that further, banks had sanctioned loans to a slew of large infrastructure projects that had obtained the necessary approvals and mobilised equity, and may be expected to now start drawing down loans.

Crisil further said that deposit rates would need to be more attractive for inflows to revive. The agency added that deposits had grown by a mere 3.9 per cent during the five months through August as against a 6.5 per cent growth last year.

Several banks such as IDBI Bank Ltd, Axis Bank and Punjab National Bank have recently raised their base rates.