Your home loan EMIs may go up

Be warned. The equated monthly installments (EMIs) on your home loan may rise in the coming weeks. Banks may have to increase their lending and deposit rates as the credit-to-deposit (CD) ratio (the ratio between a bank’s loans and its deposit base) has touched an all-time high of 78.52% on September 6, according to Reserve Bank of India (RBI) data.

A higher CD ratio means higher demand for loans. It also means that banks are lending a higher percentage of their deposits to customers.

On Thursday, the government announced that it would provide additional funds to banks for onward lending to customers of consumer goods at cheaper rates. No time frames were announced. So, EMIs on car and consumer goods loans may fall ahead of the festive season.

“The demand for loans is usually higher during festive season. As in previous years, this year, too, we expect the demand for credit to grow,” said SKV Srinivasan, executive director, IDBI Bank.

“For the banking system, there is an upward bias for deposit and lending rates,” he said.

The demand push will come from retail loans such as home, vehicle and other consumer loans.

Another reason that may force banks to hike deposit rates is the less than expected growth in deposits. Banks mobilise deposits from retail customers as it is cheap source of funds compared to raising bulk deposits from companies or from the money market.

“Credit growth so far in the current fiscal is 18% while deposits have grown by 14%. There is a gap in funding. So banks will have to hike deposit rates,” said Kajal Gandhi, banking analyst,


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