Deposit rates of public sector banks are already significantly lower than that of private banks; they may not be able to pass on a rate cut that easily
Term deposit rates in the one year and above bucket for state-owned and private sector banks have seen the widest divergence. While leading private sector banks have been offering 7-7.3 per cent (few even close to 8 per cent), most state-owned banks have been offering 6.5-6.75 per cent for such deposits.
The bank has been relying on its excess investments in government securities to fund its credit growth (still muted though when compared to private sector banks)
The latest cut in deposits rates can continue to add pressure on deposit growth for the bank. It could continue relying on its excess SLR investments to fund growth; though the leeway has reduced significantly over the past year.
For full report please click on the following link: How RBI’s possible rate cut today could add pressure on PSU banks’ deposit growth