New Delhi,jul 15
Lending and deposit rates are expected to moderate gradually in the coming months as high-cost legacy deposits mature and liquidity conditions remain comfortable, although competition for retail deposits and banks’ efforts to protect margins are likely to keep the pace of decline measured, according to a CareEdge report.”Going forward, lending and deposit rates are expected to moderate gradually as legacy high-cost deposits continue to mature and liquidity remains comfortable. However, competition for retail deposits, banks’ focus on margin preservation and the pace of deposit repricing are likely to keep movements in both fresh and outstanding spreads relatively modest in the near term,” the report said.The report said the gradual easing in funding costs is expected to keep fresh lending spreads under mild downward pressure as monetary policy transmission continues, while banks are likely to balance lower funding costs with the need to preserve margins. Looking ahead, CareEdge Economics expects the benchmark 10-year government security (G-sec) yield to average 6.8-6.9 per cent during the year, assuming an average Brent crude price of USD 90 per barrel. Softer bond yields are expected to support banks through treasury gains, improve funding conditions in debt markets and reduce borrowing costs for corporates.The report also said recent Reserve Bank of India (RBI) measures, including incentives for FCNR(B) deposits, easing of ECB norms for public sector undertakings, expansion of the Fully Accessible Route (FAR) for G-secs and tax exemptions for FIIs and FPIs, have helped contain external financing pressures.
