Moody's said that deposit rates are set to rise in view of surging investments, which have soaked up excess liquidity in the banking system
Bank deposits rates in India are expected to rise, bringing some relief to citizens who have been reeling under inflation and low returns on their savings, said the research arm of global rating agency Moody's, reports PTI.
"Indian bank depositors will soon see interest returns rise for the first time since late 2008," Moody's Analytics said today.
"The move will be welcomed by savers, who have seen rising prices and falling deposit rates erode the value of their savings over the past year," it added.
Moody's said that deposit rates are set to rise in view of surging investments, which have soaked up excess liquidity in the banking system.
It said the deposit rates, which have fallen sharply since late 2008, are yet to rise in response to the recent hikes in policy rates by the Reserve Bank of India (RBI) to tackle inflation—which stood at 9.59% in April.
Excess liquidity has been a major factor in holding down commercial bank rates.
From late 2008, liquidity in the banking system rose sharply as monetary easing and weak private borrowing left banks awash with funds.
"Since the beginning of this year, however, the volume of surplus funds deposited at the RBI has trended down, and since 31st May, banks have moved from net lenders to net borrowers of funds from the central bank," Moody's said.
It said that inflation is still uncomfortably high and the RBI is expected to raise its main policy rates by 25 basis points at its July meeting.
The next RBI rate hike is expected to flow through to deposit rates at commercial banks, Moody's added.
It said, however, that the uncertain situation in Europe and vulnerability of India’s financial system to sudden capital outflows provide good reasons to continue the current gradual approach to monetary tightening.
Apart from the government, the industry also has a responsibility to give back to the land from which the resources have been extracted, the minister said
The government will make it mandatory for mining companies to earmark 26% of their profit for local and tribal welfare, a move that has found support of the Tatas, mines minister BK Handique said today, reports PTI.
The proposal would be part of the new mines legislation, the draft for which would be sent to the Cabinet later this month, Mr Handique told PTI, adding that the issue of profit sharing for local area development to quell social unrest has been supported by the Tatas.
"We are introducing the annuity of 26% of profit (earned by mining companies) towards corporate social responsibility (CSR)... 26% is a convenient one for us and will bring justice to these people," he said, adding that other mining companies have not yet responded to the idea.
"Yes, the Tata Group has backed it...the Tatas came to me the other day. They did appreciate the annuity," Mr Handique said while pointing out that he knew the task was not easy as miners' bodies were opposed to it.
Handique said the draft had been sent some time back to the law ministry for approval after extensive consultations with the states and other stake holders.
"We are awaiting vetting of the draft by the law ministry... This will come to us next week and then we will go to the Cabinet," he said, hoping that it would be introduced in the winter session of Parliament, which normally commences in December.
"After we introduce the bill, it will be immediately referred to the standing committee. It is up to the standing committee how much time it takes," he said when asked when the new law would be in place.
Elaborating on the new provision, distinct from a windfall tax on mining, which is under consideration of the finance ministry, he said that apart from the government, the industry also has a responsibility to give back to the land from which the resources have been extracted.
"You see, we have certain responsibilities, commitment to the host population. They must be given justice. You will shift them out of their land for your projects. You will not do anything for their welfare? We are very particular on this point," Mr Handique said, adding that he is fully aware that there would be "stiff opposition" to the move.
It is for this reason, the ministry had eight rounds of consultations with various stake holders besides the 11-mineral bearing states, Mr Handique said, adding the provision in the new Act "will be not palatable to many.