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WADTDR increased by 8 bps in July, could contract banks’ NIM in FY24

The Weighted Average Domestic Term Deposit Rate (WADTDR) on outstanding rupee term deposits increased by 8 basis points (bps) from 6.47% in June to 6.55% in July 2023. The WALR, or weighted average lending rate, remained flat during the same period.

This increase in deposit rates is likely to put pressure on the net interest margin (NIM) of banks in the financial year 2023-24. The NIM is the difference between the interest income banks earn on their loans and the interest they pay on their deposits. A decline in the NIM could make it more difficult for banks to generate profits.

CareEdge Ratings, a credit rating agency, has said that the increase in deposit rates could lead to a contraction of the NIM by 5-10 basis points in FY2023 -24. The agency has also warned that banks with high levels of retail deposits could be more vulnerable to the impact of rising deposit rates.

The RBI has been raising interest rates in recent months in an effort to control inflation. The central bank is expected to continue to raise rates in the coming months, which could further increase the pressure on banks’ NIMs.

Banks are likely to take steps to mitigate the impact of rising deposit rates, such as increasing lending rates and adjusting their asset liability management strategies. However, the full impact of the rate hikes on banks’ profitability will not be known for some time.

In the meantime, depositors can expect to earn higher interest rates on their savings and term deposits. However, borrowers should be prepared for higher interest rates on their loans.

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Some related questions and answers from this article:-

Question: What is the Weighted Average Domestic Term Deposit Rate (WADTDR)?

Answer: The WADTDR is the average interest rate paid by banks on their outstanding rupee term deposits. It is calculated by taking the total interest paid on term deposits and dividing it by the total amount of term deposits.

Question: Why did the WADTDR increase in July 2023?

Answer: The WADTDR increased in July 2023 due to a number of factors, including:

The RBI’s decision to raise interest rates in an effort to control inflation.
The increase in demand for term deposits from investors seeking higher returns.
The decline in the supply of term deposits as banks have been more aggressive in lending.

Question: How will the increase in the WADTDR impact banks’ NIMs?

Answer: The increase in the WADTDR will put pressure on banks’ NIMs. This is because the NIM is the difference between the interest income banks earn on their loans and the interest they pay on their deposits. When the WADTDR increases, the interest banks pay on their deposits increases, which reduces their NIM.

Question: What can banks do to mitigate the impact of the increase in the WADTDR?

Answer: Banks can take a number of steps to mitigate the impact of the increase in the WADTDR, such as:

Increasing lending rates.
Adjusting their asset liability management strategies.
Investing in higher-yielding assets.
Reducing their reliance on term deposits.

Question: What are the implications of the increase in the WADTDR for depositors and borrowers?

Answer: The increase in the WADTDR will benefit depositors as they will earn higher interest rates on their savings and term deposits. However, borrowers will be affected as they will have to pay higher interest rates on their loans.

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Article: in Hindi –

बाजार ऋण दर (WADTDR) जो कि भारतीय रुपये में खुले अवधि जमा पर दी जाने वाली औसत ब्याज दर है, जुलाई 2023 में जून में 6.47% से बढ़कर 6.55% हो गई है। WALR यानी औसत ऋण दर समान अवधि के दौरान स्थिर रही।

यह जमा दरों में वृद्धि वित्त वर्ष 2023-24 में बैंकों के शुद्ध ब्याज अंतर (NIM) पर दबाव डालने की संभावना है। NIM बैंकों द्वारा अपने ऋणों पर अर्जित ब्याज आय और उनके जमा पर भुगतान की जाने वाली ब्याज के बीच का अंतर है। NIM में गिरावट से बैंकों को मुनाफा कमाना मुश्किल हो सकता है।

एक क्रेडिट रेटिंग एजेंसी, केयरएज रेटिंग्स ने कहा है कि जमा दरों में वृद्धि से वित्त वर्ष 2023-24 में NIM में 5-10 आधार अंकों का संकुचन हो सकता है। एजेंसी ने यह भी चेतावनी दी है कि खुदरा जमा के उच्च स्तर वाले बैंक बढ़ती जमा दरों के प्रभाव के प्रति अधिक संवेदनशील हो सकते हैं।

रिजर्व बैंक ने हाल के महीनों में मुद्रास्फीति को नियंत्रित करने के प्रयास में ब्याज दरों में वृद्धि की है। केंद्रीय बैंक आने वाले महीनों में भी ब्याज दरों में वृद्धि का अनुमान है, जिससे बैंकों के NIM पर और दबाव बढ़ सकता है।

बैंक जमा दरों में बढ़ोतरी के प्रभाव को कम करने के लिए कदम उठाने की संभावना है, जैसे कि ऋण दरों में वृद्धि और अपने परिसंपत्ति-दायित्व प्रबंधन रणनीतियों को समायोजित करना। हालांकि, बैंकों की लाभप्रदता पर ब्याज दरों में वृद्धि के पूर्ण प्रभाव का कुछ समय बाद ही पता चलेगा।

इस बीच, जमाकर्ता अपने बचत और सावधि जमा पर उच्च ब्याज दर अर्जित करने की उम्मीद कर सकते हैं। हालांकि, उधारकर्ताओं को अपने ऋणों पर उच्च ब्याज दरों के लिए तैयार रहना चाहिए।