For PVBs the increase on fresh deposits was lower 195 bps and that on loans was 154 bps
Dipanwita Mazumdar,
Economist
Bank of Baroda
FinTech BizNews Service
Mumbai, January 1, 2024: A closer look at the table reveals how transmission of
interest rates across different spectrum have fared. The change is taken from Apr-22
just before RBI embarked on the journey of rate hikes, to control inflation.
? The transmission of interest rates was better for PSBs relative to PVBs. In case of
PSBs the transmission on fresh term deposits was almost complete with an increase
of 240 bps. On the lending side, WALR rose by 183 bps.
? For PVBs the increase on fresh deposits was lower 195 bps and that on loans was
154 bps.
? The increase in MCLR on 1 year loans was again higher for PSBs relative to PVBs
with the difference being 23 bps for this period.
? PVBs had a higher share of loans under EBLR at 78% compared with PSBs with
37%. Yet the transmission of rate increase was swifter for PSBs.
? In the same period the accretion to deposits have been Rs 31.7 lakh crore
(outstanding deposits as of Apr’22: Rs 166.2 lakh crore, outstanding deposits as of
15 Nov 2023: Rs 197.9 lakh crore). For credit, there has been accretion of Rs 38
lakh crore during the same period (outstanding credit as of Apr’22: Rs 119.6 lakh
crore, outstanding credit as of 15 Nov 2023: Rs 158.1 lakh crore). (All figures are
including the impact of merger)
? Looking at the movement of other interest rates, it is clear that the transmission has
been pretty fast on short term rates (TBill rates). This is also contingent on the
evolving liquidity conditions. The entire movement of repo was priced in to OIS to
some extent. 10Year sovereign yield on the other hand, remained broadly stable,
reflecting robust demand conditions on the back of resilience of Indian economy.
? Tighter liquidity conditions in the wake of restrictive policy has resulted in WALR
going above repo in the current cycle.
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