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“Given persistent liquidity constraints and heightened macro uncertainty, the scope for further moderation in term deposit rates appears exhausted,” said , director and lead, (banking, financial services and insurance), . “Continued inflationary pressure driven by the conflict could result in a repo rate increase, which would in turn push term deposit rates higher.”
The structural challenge, however, runs deeper than the current rate cycle. Deposit growth has been losing ground to credit expansion for more than a decade. Between 2023-24 and December 2025, deposits increased 9% against credit growth of 11.3%. In the preceding two years – 2021-22 to 2023-24 – the gap was even wider, with deposits growing at 11.9% while credit expanded at 17.6%. The dynamic was reversed between 2017-18 and 2021-22, when deposits expanded at 10.5% against credit at 8.7%, and between 2009-10 and 2013-14, when deposits grew at 15% against credit at 17%.
“While transmission through MCLR (marginal cost of funds-based lending rate) and (external benchmark lending rate) will influence deposit pricing, banks are expected to continue offering relatively competitive term deposit rates to attract funds,” said Sanjay Agarwal, senior director, . “This stickiness in deposit rates reflects the continued competition for deposits amid credit growth outpacing mobilisation – keeping funding costs elevated and exerting pressure on margins.”
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