The term deposit rates of public sector banks over one year maturity have declined from a range of 8-10 per cent in August 2000 to 6-8 per cent now. This fall in the interest rates in the recent period has been in consonance with the monetary policy stance of a soft and a flexible interest rate regime.
Despite the fall in deposit rates, depositors have received positive real interest rates of close to 2 per cent in the second half of the 1990s, which is much higher than the real return on deposits during the first half of the 1990s. 2  BIS Review 1/2003  On the other hand, lending rates of banks have not come down as much.