Deposits post demonetization have crossed Rs 5.00 lakh cr - Interest rates likely to cut

INDORE, India - Nov. 21, 2016 - PRLog -- Subsequent on  the demonetization of old 500 and 1000 rupee notes, the stream of cash flowing into banks  has touched over Rs 5 lakh crore, which raises possible hopes of an interest rate slash on car and home loans. The Punjab National bank, State Bank of India, ICICI and HDFC have already declared a cut in the rate of  fixed deposit upto 0.25% which will enable the lenders to get reduced cost of borrowing. It is further expected that more cash will pour into banks in the coming days.  More cash is expected to be deposited with banks in the coming days since the window is open till December 30.
Punjab National bank informed that they have got deposits of over 47,000 crore. They have cut deposit  rates on high value bulk  deposits by 15 – 50 basis point. PNB sources said that CASA (Current Account & Saving Account) has surged, whereby the lowering of deposit rates will have impact on the lending rate going ahead.
The State Bank of India (SBI) said  that  it has received Rs 1.27 lakh crore since the bank started accepting the scrap Old High Denomination Currency notes on November 10.  The SBI being  the largest public sector bank in country, recorded Rs 6477 crore worth of over-the counter exchange (OTC) of currency notes.  The SBI official source says, that  a enormous amount of money is pouring into the savings and current accounts, which has turned the system liquidity into surplus and the extra liquidity will not go away from the system in a hurry,  that may push down the rate of  interest further.  The SBI expects inflation in November to slip below 4%.
In the meantime, HDFC Bank has also cut interest rates by 0.25% across all tenures on bulk deposits ranging between Rs 1-5 crore.
The cash deposits in banks are growing momentum  because people are forced to put their money in bank accounts due to invalidity of these high value notes
The demonetization is further expected to show the way to an easing in inflation since consumer demand will come down.
Also, Bankers expect a repo rate reduction by 0.25 to 0.50%  in 2016-17. In its last monetary policy in October, the RBI had cut the key repo rate, at which it lends to banks,  by 0.25%  to 6.25%.  The RBI has reduced repo rate by 1.75%  since January 2015.
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