Soaring bank deposits may decrease Interest rates on deposits & loans. Good news for investors.

Deposits in commercial banks have been soaring since the past few weeks. The rise in the deposits has been attributed to the government releasing funds to the development ministries and the contractors.

The banks added deposits of Rs 18 arba between Asar 21 and 28, taking the combined total deposits of commercial banks to over Rs 10 kharba. Till Asar 21, the combined total deposits of all commercial banks had stood at Rs 9 kharba 84 arba.

Likewise, the banks extended loans of Rs 2 arba this past week. The banks have been increasing their lending by Rs 2 arba every week, except for the second week, when the lending increased by Rs 4 arba.

The situation is expected to help banks manage the liquidity with more ease. Interest rates of the banks are likely to be affected by the increasing liquidity. If the situation persists, the interest rate on deposits will decline while banks would come under pressure to reduce the interest on loans.
src : sharesansar