Or, that cash, sloshing around in the months leading up to the polls, would flow back into banks and soften interest rates. And, as less attractive returns slow down deposit growth, there would be no meaningful change in lending rates. Thus, any move towards lowering the cost of debt capital must begin with steps to soften the interest banks pay on deposits. Neither the minister nor the RBI governor can prod banks to lower deposit rates that would come down only with greater flow of deposit to banks. Besides liquidity infusion by RBI, volume of deposits will improve if savers are incentivised to park more money with banks.

Source: Economic Times June 02, 2019 17:25 UTC