Banks face a dilemma on lowering deposit rates any further
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MUMBAI, May 24 -- Amid falling interest rate scenario and with growing pressure to lower lending rates and improve transmission, bankers are in a fix over balancing interests of borrowers and depositors.
There is no doubt that deposit rates are expected to go further south after RBI's rate cut on Friday. Millions of depositors face the risk of earning a lot less on their savings as lenders try to protect their margins while passing on the benefit of the rate cut to borrowers.
As deposits form a large chunk of a bank's source of funds, any cut in lending rates is either followed or preceded by a similar cut in deposit rates. Moreover, if borrowers who are under a loan repayment moratorium right now fail to turn around and repay past dues...
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