New Delhi, Feb 25: The short-term fixed deposit rates offered by banks which witnessed unprecedented high levels in the past one month are all set to return to more realistic levels, ICICI Securities (I-Sec) said."The present fixed deposits rates look unsustainable and are due for a downward correction as there are signs of liquidity in the system," I-Sec said in its report on interest rates.
The FD rates, which touched a high of 18 per cent for 30-day deposits in the latter half of January, came down subsequently, but are still much higher than what is warranted by the changed liquidity conditions in the economy, the report said.
The spurt in interest rates was a direct consequence of the Reserve Bank's measures announced on January 16 on account of a weakening rupee and instability due to the South-east Asian crisis.
The report attributed the sudden spurt in interest rates to scarcity of funds which created a panic situation wherein banks were desperate to avoid default on cash reserve ratio (CRR),leaving no avenue unexplored in raising cash to tide over the crisis.
An improving sentiment and stronger currencies in the Asian countries have helped in easing the pressure on the rupee, the report.
Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
