Aug. 1: If you are planning to make a large purchase on credit — a home, a car or even household electronics — it may make sense to do it in the next couple of months. Public and private sector banks have raised interest rates that they are paying out on deposits over the past week.
Private sector major ICICI Bank and public sector lender Punjab National Bank have been the latest to join the bandwagon. Both the banks announced hikes in deposit rates of up to 0.75 per cent on Saturday. Last week had seen other lenders such as HDFC Bank, Central Bank, Kotak Mahindra and some other lenders raising deposit rates as well. Other lenders are likely to follow suit in the coming weeks.
As the cost of taking money from the public goes up, banks will also raise the interest rates on loans. ICICI Bank’s managing director and chief executive officer, Ms Chanda Kochhar, expects lending rates to go up after September. However, interest rates on deposits will need to go up before banks can raise rates on loans. This is because over the past year, the growth in loans has been more than the growth in deposits.
These hikes have come after the Reserve Bank of India (RBI) hiked some policy rates in the latest credit policy, in a bid to bring down rising prices. Economists expect further rate hikes from the central bank in the coming months as the India’s central banker tries to control inflation.