At IDBI Bank, the panel which decides on interest rates is meeting on Friday. “The money flowing into accounts (savings and current) after the decision to scrap Rs 500, Rs 1,000 notes as legal tender has been huge. What do we do with the surplus liquidity?” asked a bank senior.
Bankers said rates are expected to reduce by up to 50 bps over the next few months. SBI had decided to cut by 15 bps on term deposits between one year and three years.
Public sector bank executives said more rate cuts – on deposits and subsequently on loans – are in the offing. SBI has an excess statutory liquidity ratio of 5.5 percentage points over the minimum required. According to Reserve Bank of India (RBI) data, banks
parked Rs 2.48 lakh crore with the central bank at the reverse repo window on Wednesday, and Rs 1.80 lakh crore a day before.
Deposits have grown by 9.8% in the 12 months till October-end, at Rs 99,839 crore. The growth in the earlier 12 months was 10.5%, said RBI.
Apart from the post-demonetisation inflow, credit growth is not picking up. Excess money is being parked in the bond markets but yields have fallen there.
Credit expanded by 9.1% for the 12 months ended October, up from 8.8% a year before, RBI said.