The Reserve Bank of India (RBI) is keeping a close watch on the process of transmission of policy repo rate to lending and deposit rates, according to Governor Shaktikanta Das.
The Governor noted that the pace of transmission of monetary policy actions to lending and deposit rates has quickened in the current tightening phase, beginning May 2022.
The weighted average lending rates (WALRs) on fresh and outstanding rupee loans have increased by 117 basis points (bps) and 63 bps, respectively, during the period May to October 2022.
During the aforementioned period, the repo rate was cumulatively increased by 190 basis points.
On the deposit side, the weighted average domestic term deposit rate on fresh and outstanding deposits increased by 150 bps and 46 bps, respectively, during the same period, said Das.
The Governor emphasised that RBI doesn’t give any direction to banks with regard to their interest rates, on either side -- whether credit or deposit.
“Credit and deposit growth have to be seen in the proper perspective. Credit growth is on a low base, deposit growth is on a high base. That is why they look to be so divergent.
“So, whatever is now happening...has to be seen in the context of the base effect. Banks do their ALM and depending on their funds and ALM requirements, they will take necessary action both on the credit and deposit side,” said Das.