## Analysis of Lending and Deposit Rates in India
This report analyzes the transmission of interest rates to lending and deposit rates in India between May 2022 and January 2024. It compares the performance of public sector banks (PSBs) and private banks (PVBs) in this period.
Fresh Rupee Loans: PSBs passed on a higher proportion of interest rate changes to fresh rupee loans compared to PVBs.
PVBs exhibited a higher transmission of interest rate changes to outstanding rupee loans.
PSBs increased their deposit rates more significantly than PVBs, particularly for term deposits.
The share of bank loans with interest rates exceeding 8% increased substantially from 47.2% in March 2022 to 83.7% in December 2023.
Higher interest rate differentials for senior citizens and dedicated deposit schemes have led to a significant shift in deposit accumulation towards these segments.
PSBs and PVBs demonstrate different patterns in transmitting interest rate changes to lending and deposit rates.
The share of high-interest loans has increased considerably.
Senior citizens are playing an increasingly important role in deposit growth.
These findings have implications for both banks and borrowers. Banks need to carefully manage their interest rate risk and ensure they are offering competitive rates to attract and retain customers. Borrowers should be aware of the rising interest rate environment and plan their finances accordingly.