Banks to raise Interest rates for deposits as competition grows: Jaideep Iyer of RBL Bank

Bank deposit rates are expected to rise due to competition among banks for deposits

Banks are likely to increase interest rates for deposits with the markets getting increasingly competitive, said Jaideep Iyer, Head-Strategy, RBL Bank.

Further, with the Reserve Bank of India (RBI) increasing the limit of gold loans, Iyer said that gold loans will grow due to the backing comfort provided by gold prices. The RBI has doubled the gold loan limit for urban cooperative banks to Rs 4 lakh.

Gold loans have been considered safe lending for banks despite it being operationally intensive, Iyer said. “I don’t think given the environment, we will have a bearish view on gold,” Iyer said in an interview with Moneycontrol after RBI Monetary and Credit Policy announcement.

As for the other lending, Iyer said RBI’s concern about the spike in unsecured loans is valid as there is high delinquency in small-ticket loans. “We have seen early signs of stress in the low ticket size loans in the industry where personal loans and unsecured loans do seem to be showing high delinquency.”

He added that RBI in its private and public communication to banks have warned them of this situation and to take appropriate measures to tackle it.

Responding to the reports that the government is considering spending Rs 60,000 crore to provide subsidised loans for small urban housing segments, Iyer said that it will provide some demand pickup in housing loans as it saw a dip recently due to the high-interest rates.

“Currently, we are seeing that affordable home loan demand has come off a little bit and prime housing is still strong in metros and urban areas. But any government scheme will allow banks and NBFCs to tap that demand,” he added.