Interest Rates Likely to Come Down

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Immediate effect of Demonetization is that Banks have been flooded with Old Currency of Rs.500/ & Rs.1000/- since 10th of November, 2016 and CASA (Current Account-Savings Account) Portfolio of Banks has sky-rocketed. Parking of short term funds in Banks has resulted increase of Deposits of Scheduled Commercial Banks with RBI.

RBI is most likely to reduce Repo Rate and Reverse Repo Rate in its quarterly Monetary Policy in December, 2016 with such an easy liquidity position.

It is evident from the news from India’s largest Bank State Bank of India, where a sum of Rs.1.14 Lakh Crores has been collected till 16th November, 2016. As a result of such high liquidity, SBI has reduced its rates of interest by 25points. So the immediate effect of such change shall be that deposit rates shall come down by 0.25% as well as rates of Home Loan & Car Loan Portfolio shall also be cheaper by 0.25%. If SBI has come with such an announcement, other Banks have always followed this move of SBI.

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