Despite the Reserve Bank of India (RBI) infusing some liquidity in the banking system through a CRR (cash reserve ratio) cut, interest rates on deposits are likely to stay firm in the near term as demand for loans is expected to be strong in the fiscal fourth quarter ended March 2025.

The reduction in CRR by 50 basis points to 4% in the December monetary policy released Rs 1.16 lakh crore into the system This, however, will not have bring about any material change in deposits or ending rate, analysts said.

The liquidity conditions remain volatile while the Indian rupee is under pressure weighed against the dollar. The rupee hit an all-time low of 85.10 against the dollar on 20 December in the wake of the US Federal Reserve signaling delayed interest rate cuts in 2025. The RBI will have to consider rising pressure on rupee as well as inflation while deciding on a possible interest rate cut in its upcoming February policy to support growth.  

The busy credit season will also keep deposit rates elevated, though it may have peaked.

Deposit growth has by and large lagged behind credit growth for the whole of 2025, though the recent RBI data shows that they are tending to converge. Deposit growth stood at 10.7% compared to system loan growth of 10.6% on-year, as of 29 November.

Banks are competing against each other to garner more deposits by keeping interest rates high. With credit growth marching ahead, this competition will not end in the near term even if the RBI decides to lower interest rates.