Working interest, deposit rates roiled banks in 2010

 While the loans seekers may have to pay higher Equal Monthly Instalments the depositors can hope for better returns on their savings in the coming year. The interest rates on home, auto and corporate loans have gone up by about 2 per cent during the course of the year.

The increase in lending rate was matched by a similar increase in interest rate on fixed deposit. While interest rate on auto and home loans ranges between 8 to 11 per cent, the depositors can earn up to 8-9 per cent.

The hike in retail interest rate during the year was triggered by tightening of the monetary policy by RBI, which for the sixth time during the year raised its key short-term lending and borrowing rates known as repo and reverse repo rates to tame inflation.

However, banks continued to hold on their rates for almost 6 months despite RBI raising key policy rates and reserve ratio in quick succession to tame inflationary expectations. But interest rates started hardening soon after the first quarterly review of the monetary policy in July in which RBI raised short-term lending rate (repo) to 5.75 per cent and short-term borrowing rate (reverse repo) to 4.50. Thus, repo went up by 0.25 per cent and reverse repo by 0.50 per cent respectively.