Banks say no to further hike in deposit rates

Banks on Monday ruled out any further increase in deposit rates in the near future even though inflation was eroding the return on deposits.

"Banks have already responded to the RBI cues by hiking their rates. There is no room for a further hike,"Indian Bank's Chairman and Managing Director M S Sundara Rajan told PTI.

Inflation touched a 13-year high of 11.42 per cent in the first week of June and then reached 11.63 per cent for the week-ended  June 21, drawing swift measures from the policy makers.

Banks hiked both their prime lending and deposit rates recently, following a hike in both short-term lending rate (repo) and mandatory cash reserve for banks by 50 basis points each by the Reserve Bank to control inflation.

Sundara Rajan said the inflation is likely to come down in the near term owing to the various measures taken by the monetary and fiscal authorities, thus bringing back positive returns to depositors.

"We have to wait till the inflation ease in the following months..I'm sure that it will come down in the near term," he said.

Corroborating this view, Yes Bank's Managing Director and CEO Rana Kapoor said another round of hike in deposit rates was unlikely as it would further affect the margins of the banks.

"I see a very less scope for banks to increase their deposit rates even as the present high inflation is giving negative returns to depositors," Kapoor said.