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Deregulation of interest rates on savings bank accounts saw the street shorting banking stocks on Tuesday. The Bank Nifty lost 1.41 per cent or 136.25 points to close at 9,511 while the CNX PSU Bank Index lost 2.61 per cent or 82.4 points to close at 3,075.45.
BSE's Bankex also shed 1.2 per cent or 133.02 points to close at 10,919.4.
Experts expect a rate hike of anywhere between 100 to 200 basis points in deposit rates in the near-term.
“India has a very large domestic savings rate and a hike to the extent of one to two percentage points will channelise more deposits into the banking system,” said Mr Kishor Ostwal, CMD CNI Research.
Premature to deduce
Experts also said that it was premature to deduce an outcome of this move by RBI. “Smaller banks have nothing to lose, and even if they hike deposit rates by two to three percentage points, it will still be cheaper for them when compared to the rates they go out and borrow,” said Mr Dinesh Shukla, Banking Analyst, Sharekhan.
Banks with a large proportion of CASA (current account savings account) will be more circumspect while raising deposit rates, said analysts.
Wide variance likely
“Passing on the rate hikes to customers would be very difficult as it depends on various factors such as their yield on funds, cost of funds and the like. In case banks are unable to pass it on, they might resort to things such as charging customers if a certain number of withdrawals are exceeded and so on,” said Mr Shukla.
There was unanimity among experts that banks would surely display irrational behaviour on deposit mobilisation in the short term. It would not be easy to effect migration both from one bank to another and from savings to current account as customers today expected a whole host of other services along with an account, they said.
On the other hand, cartelisation by banks was also not possible as competition is intense, said those in the trade.
Experts questioned the timing of deregulation and felt that RBI should not have done so given that interest rates were very high and liquidity was an issue.
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