June 13 (Punjab Khabarnama) : State Bank of India (SBI) Chairman Dinesh Kumar Khara has said that interest rates on FDs are at their peak and are expected to come down in the medium term. The country’s leading public sector bank also said that the Reserve Bank of India (RBI) may start easing the interest rate cycle from the third quarter of the current financial year. Last week, RBI kept its key policy rate repo unchanged for the eighth consecutive time, focusing on inflation amid strong economic growth.
Khara said, ‘We hope that in the third quarter starting from October, there will probably be some possibility of retail inflation moving towards four percent and that will be the right time when we can expect some reduction in the policy rate from the Reserve Bank’ i.e. interest rates on FDs may be reduced from October. After reducing the repo rate, banks will also reduce interest.
Many central banks started reducing interest
Some central banks of advanced economies like Switzerland, Sweden, Canada and Euro zone have started the cycle of reducing rates during the year 2024. On the other hand, market expectations of interest rate cuts by the US Federal Reserve, which were high earlier, have now subsided. As far as interest rates in the banking system are concerned, Khara said that more or less they have already peaked. He said, ‘Going forward, we will see some minor changes. I think, if we look at the medium-term trajectory of the interest rate, it will probably be in a downward trend.’ Last month, SBI had increased interest rates on select short-term maturity term deposits by up to 0.75 percent. Under retail term deposits, the interest rate on 46-179 days deposits has been increased by 0.75 percent to 5.50 percent. Earlier it was 4.75 percent.
