Why when loan rates are going up, FD rates are not? (Quick 🧵)
Repo rate linked home loan rates like the name suggests are directly linked to repo rates. When repo goes up, lending rates go up & vice versa (1/5)

As per RBI, banks have a maximum of 3 months to reset the repo rate linked 'new' home loan rate. Banks may use this in their favour to reset 3 months later in a falling repo rate senerio & immediately in a rising rate senerio (2/5)

But for us as 'existing' loan borrowers, our reset of interest rate date is pre decided on the date of taking the loan (3/5)

In case of FD rate, the rate is linked to the banks requirement for liquidity. If the banks have enough liquidity (current case) it might not need to increase FD rates because it does not need more money as deposits (4/5)

Also on lending (credit off take), credit off take has gone up but that's to the retail segment. Banks are still not aggressively lending to corporates & hence the requirement for liquidity to give loan is low & hence transmission of higher FD rates will happen gradually (5/5)