Weighted average banking spreads continued their downward momentum and declined by 49bps on year-on-year and 18bps on month-on-month basis in March 2020.
The sequential fall was led by trimmed lending rates as declining trend in KIBOR continued in March 2020 as well.
To note, this trend in KIBOR began weeks before the first cut in the Policy Rate. Banking spreads for the first quarter of CY20 clocked in at 5.4 percent, declining by 12bps on year-on-year and 65bps on quarter-on-quarter basis.
The fresh spreads, however, witnessed an increase of 217bps on year-on-year and 13bps on month-on-month basis as deposit rates on fresh deposits dipped during the month, Amreen Soorani, at JS Global Capital said.
Going forward, the impact of 425bps decline in Policy Rate during March-April 2020 will be immediately reflected in lower deposit costs of the coming months, with a lag impact on lending rates; temporarily resulting in higher banking spreads for the short-term, she added.
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