Despite over a 100-basis point decline in interest rates, bank deposits surged by 11.4% during the financial year ended March 2021, as against 7.9% in the previous year. However, credit growth declined to 5.6% in FY21 from 6.1% in the previous year, according to Reserve Bank of India data.
“Interest rates are likely to remain range-bound going forward as RBI is committed to ensuring easy liquidity and low repo rates,” said Sandeep Bagla, CEO, Trust Mutual Fund. However, real interest rates have remained negative after adjusting for inflation levels.
Retail inflation was at 5.03 per cent in February 2021, which is higher than the one-year term deposit rate of 4.9 per cent. “The real interest rate on the short end of the curve will remain severely in the negative for some time penalizing the savers. One hopes that this does not affect the savings rate materially,” said Dhiraj Relli, MD &CEO, HDFC Securities.
