Core Viewpoint - The Reserve Bank of India (RBI) expects deposit rates to moderate in line with bank lending rates following a cumulative 125 basis points cut in the policy repo rate since February 2025, which has resulted in a decline in the weighted average domestic term deposit rate (WADTDR) [5][4]. Group 1: Deposit Rates and Monetary Policy - RBI Governor Sanjay Malhotra indicated that deposit rates should reflect real interest rates, which remain high despite nominal rates appearing low due to low inflation [5][4]. - The WADTDR on fresh rupee term deposits decreased to 5.57% in October 2025 from 5.61% in September 2025, marking a 105 basis point decline [5][4]. - The decline in deposit rates has been broad-based, with the WADTDR on fresh deposits down by 105 basis points and outstanding deposits softening by 32 basis points over the same period [4][5]. Group 2: Bankers' Perspectives - Bankers have noted that deposit rates have already moderated, suggesting limited scope for further reductions [5]. - Ashwini Kumar Tewari, managing director at State Bank of India, emphasized the importance of considering depositor interests while indicating that the asset-liability committee will decide on any further rate changes [5].

Core Insights - The weighted average cost of fresh rupee term deposits has increased for the first time in six months, indicating a potential bottoming out of deposit rates and tighter liquidity as credit growth picks up [1][11] - The average rate on fresh term deposits rose to 5.60% in September 2025 from 5.56% in August, marking the first increase since March [2][11] - Analysts suggest that deposit rates are unlikely to decrease significantly from this point due to rising credit growth and competition among banks for funds [10][12] Deposit Rates and Trends - The increase in the weighted average cost of fresh term deposits by four basis points suggests that bank deposit rates may be at their lowest point in the current cycle [1][11] - Fresh term deposits have decreased from a peak of 6.65% in March, influenced by a 100 basis points repo cut by the RBI this year [6][11] - The average outstanding rupee term deposit rate fell slightly to 6.82% in September 2025 from 6.87% in August [9][12] Credit Demand and Competition - An increase in credit demand is contributing to heightened competition among banks for funds, as credit growth is improving following GST rate cuts [7][8][11] - Bankers noted that there has been an uptick in bulk deposit rates recently, which may have contributed to the rise in average term deposit rates [8][11] - Bank margins are recovering after a decline earlier in the fiscal year, with some banks already reporting improvements [9][12]