Banks borrow from you through deposits to lend to companies and individuals. Bank lending may seem to be healthy but that comes entirely from the retail loans. Loans of banks to industries account for a larger chunk than retail loans and this has remained stagnant. In other words, there isn\u2019t much lending happening. That means there isn\u2019t enough demand for bank money. In the absence of such demand, banks have little incentive to pay more to get your funds. Banks are most motivated to hike your deposit rates when they need the money to lend at a faster pace. This was the case in every cycle where you saw a higher deposit rate.<\/p>\n![\"\"](\"https:\/\/www.fundsindia.com\/blog\/wp-content\/uploads\/2018\/08\/FD.jpg\")
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However, this is not the case now. Let us take a simple metric – the Credit-Deposit Ratio of banks as put out by RBI. As of March 2018, this stood at 75.6%. In high deposit rate periods, this ratio has been a healthy 80% and even closet to 90% in the case of private sector banks.<\/p>\n
Those were periods when banks were enticed to borrow from you at high rates as the demand for credit was high. Now with demand for industrial credit still remaining muted, a case for hiking lending rates is also low. So, when lending rates cannot be hiked, why would deposit rates go up?<\/p>\n