Deposit rates raised by public sector banks higher than private peers

The proportion of bank loans carrying interest rates exceeding 8 percent surged from 47.2 percent in March 2022 to 78.9 percent in March 2023, and subsequently rose to 83.7 percent by December 2023. This significant uptick in the share of loans with higher interest rates reflects a notable trend in the banking sector's lending landscape.

Between May 2022 and January 2024, public sector banks (PSBs) experienced a greater pass-through to weighted average lending rates (WALRs) on fresh rupee loans compared to private banks (PVBs). However, transmission to WALRs on outstanding rupee loans was higher for private banks. Additionally, PSBs have raised their deposit rates relatively more than private banks in the case of term deposits. Moreover, the proportion of bank loans carrying interest rates exceeding 8 percent surged from 47.2 percent in March 2022 to 78.9 percent in March 2023, and further increased to 83.7 percent by December 2023. This indicates a notable trend towards higher interest rates in the banking sector.

The State Bank of India (SBI) report highlights a significant surge in deposit accretion among senior citizens, attributed to the higher interest rate differential and special deposit schemes tailored for them. As per SBI's findings, approximately 41 million term deposit accounts are held by senior citizens in India, with a collective deposit exceeding Rs 14 trillion in 2018. This underscores the considerable impact of preferential schemes designed to cater to the financial needs of elderly depositors.

Source: business standard