{"id":20741,"date":"2024-10-17T11:58:36","date_gmt":"2024-10-17T06:28:36","guid":{"rendered":"https:\/\/bigbreakingwire.in\/?p=20741"},"modified":"2024-10-17T11:58:38","modified_gmt":"2024-10-17T06:28:38","slug":"fitch-ratings-warns-of-rising-borrowing-as-indian-banks-struggle-for-deposits","status":"publish","type":"post","link":"https:\/\/bigbreakingwire.in\/fitch-ratings-warns-of-rising-borrowing-as-indian-banks-struggle-for-deposits\/","title":{"rendered":"Fitch Ratings Warns of Rising Borrowing as Indian Banks Struggle for Deposits"},"content":{"rendered":"
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Fitch Ratings says that Indian banks may start borrowing more money if they struggle to get enough new deposits to support their loan growth. The recent sharp increase in the loan-to-deposit ratio (LDR) could become a long-term issue, especially if low interest rates on deposits, high inflation, and changing customer preferences make it harder for banks to increase their deposits.<\/p>\n\n\n\n

Bank deposit rates have been slow to change despite a significant rise in policy rates of 250 basis points during the financial year that ended in March 2023 (FY23). It is expected that term deposit rates won\u2019t fully adjust until the first quarter of FY25. Meanwhile, the return on low-cost deposits hasn\u2019t changed, causing their share of new deposits to drop to a 20-year low of 20% in FY24, according to Fitch\u2019s estimates.<\/p>\n\n\n\n

Factors like rising inflation, more digital banking options, and strong performance in stock markets are causing customers to move their money from bank deposits to other types of investments. This trend could increase funding costs for banks and make it harder for them to manage their finances if they can\u2019t replace the withdrawn deposits with long-term funding.<\/p>\n\n\n\n

Fitch doesn\u2019t expect any immediate changes to banks\u2019 ratings because there\u2019s still some flexibility in their Viability Ratings. However, if there are significant changes in funding that put extra pressure on profit margins, or if these changes affect banks\u2019 growth and cash management, it might lead to a review of their key rating scores.<\/p>\n\n\n\n

Source: Fitch<\/a><\/p>\n\n\n\n

Indian banks now hold a record $51.4 billion in short-term debt, the highest in 12 years. This rise is due to a significant gap between deposits and loan demand, leading banks to rely more on short-term borrowing to meet their funding needs.<\/p>\n\n\n\n

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