Term Deposits Share Offering Over Seven Per Cent Interest Plunges In Q2 After MPC’s Rate Cuts: RBI Data

Term Deposit Interest Rates Drop Sharply in September Quarter

The Reserve Bank of India (RBI) recently released a report indicating a significant drop in term deposits offering interest rates above seven per cent. This trend reflects the transmission of the cut in policy rates, with the RBI lowering the repo rate by 100 basis points (bps) so far this year.

Key Highlights from the RBI Report:

• Term Deposits with Interest Rates below Seven Per Cent: Saw a surge of 46 per cent in September, from 31.2 per cent a year ago.
• Deposit Rate Fall: Reflects the transmission of the cut in policy rates, with the RBI lowering the cash reserve ratio for banks by 100 bps to three per cent of a bank's net demand and time liabilities.
• Loans Linked to Repo Rate: Immediately fell as the RBI cuts rates.
• Term Deposits Growth: Declined to 11.6 per cent in September, but remained higher than current and savings deposits.

Term Deposit Market Share:

• Term Deposits above Rs 1 Crore: Rose 12.3 per cent from the previous year, standing at 45.6 per cent in September.
• Maturity of Term Deposits: 69.8 per cent were in the one to three years category, up from 66.8 per cent a year ago.
• Maturity up to One Year: Comprised 20 per cent of term deposits.

Bank-Specific Data:

• Public Sector Banks: Deposits rose to 57.6 per cent in September, from 57.3 per cent in the previous quarter.
• State-Owned Banks: Deposits rose 9.6 per cent from the previous year.
• Private Sector Banks: Deposit growth fell to 10 per cent in September from 15.1 per cent a year ago.

Regional Breakdown:

• Top Six States: Maharashtra, Uttar Pradesh, Karnataka, NCT of Delhi, Tamil Nadu, and West Bengal collectively accounted for 54.2 per cent of total household deposits in September.
• Contribution of Maharashtra: Contributed to 16.5 per cent of total household deposits.

Branch-Wise Deposit Growth:

• Metropolitan Branches: Deposits grew by 9.6 per cent in September, down from 12.7 per cent a year ago.
• Rural, Semi-Urban, and Urban Branches: Deposits grew by 11.7 per cent, 10.7 per cent, and 9.5 per cent respectively.