Money Matters: Where to borrow, where to keep

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Your borrowing cost is rising as interest rates are moving up. But it also provides you with an opportunity to earn a higher return on your deposits. Most private sector banks have raised their deposit rates in the past few weeks and as cost of funds turned expensive the lenders also increased their loan rates. On the other hand, most public sector banks have not revised their deposit rates as their liquidity positions are relatively better.

Consequently, the state-run lenders have not changed their lending rates also. An analysis of interest rates of large private and public sector banks suggest that retail customers will earn higher return on short-term deposits with private lenders. For deposits maturing in one and three years, there is not much variation on interest rates of private and public sector banks. However, borrowing cost will be lower if retail customers choose to take loans from public sector banks.