RBI Governor Shaktikanta Das
Banks will now be able to decide the interest rates on deposits and loans themselves. This is because the Reserve Bank of India has given a free rein to banks to decide the interest rates on deposits and loans. During a joint press conference with Finance Minister Nirmala Sitharaman on Saturday, RBI Governor Shaktikanta Das said that interest rates on bank deposits and loans have been decontrolled. That means now banks can decide the interest rates themselves. Therefore, they should focus on offering products that can increase the deposit amount. Let us know how the common man will benefit from this.
For this reason the decision was made
Finance Minister Nirmala Sitharaman on Saturday said banks should come up with unique and attractive schemes to attract deposits. She said deposits and loans are two wheels of a vehicle and deposits are gradually increasing. Banks should focus on core banking i.e. core business. This includes collecting deposits and providing loans to those who need funds.
Why do banks raise interest rates?
RBI Governor Shaktikanta Das said interest rates are deregulated and banks often increase deposit rates to attract funds. Banks are free to decide the interest rate. Banks are increasingly turning to short-term non-retail deposits and other liability instruments to meet the growing demand for loans. Das warned that this could expose structural liquidity problems in banks. Therefore, greater attention should be given to mobilising household financial savings through innovative product and service offerings and by leveraging their wide network.
How will the common man benefit?
Deregulation of bank loan interest rates will not only benefit banks but also customers. Often, banks increase deposit rates to attract funds. That is, to attract customers, banks often increase interest rates on deposits. If banks increase interest rates on FDs, customers will get more and more FDs, which will increase the amount deposited in the bank.
