the governments move to abolish highdenomination notes hdn has increased the probability of a cut in interest rates in the next few months as the move will increase liquidity in markets and ease the pressure on government borrowings it is estimated that banks so far have received nearly rs 2 lakh crore of deposits after the government banned old highdenomination notes and it is expected that a large of number of deposits would get added in the coming months this would strengthen the banking system further etig provides a lowdown on how retail investors can invest in different asset classes after the fall in benchmark interest rates loans experts foresee interest rate cut by 75 basis points in the next 12 months every 1 rate reduction on home loans of rs 10 lakh 20year tenure reduces emi by rs 1000 home loans constitute nearly 5060 of the total retail loans of the banks cost of acquisition of cars may drop with lower interest rates almost 8085 are sold on finance personal loans constituted nearly 22 of the total loans in september 2016 housing auto and credit card loans grew by doubledigit in september 2016 bondmutual funds bonds with higher duration to benefit most from lower interest rates if the rate falls by 1 investors may have capital appreciation of 56 for 10year bond while 910 for 20year bond equities bond yields are inversely correlated to pe a 10basis points change in the riskfree rate in india may increase the fair value of equities by 35 interest rates deposits lowcost deposit will move into the banking system due to cash demonetisation higher deposit and weak credit growth would prompt banks to go for rate cuts a sizeable amount of deposit mobilised will be parked in gsecs that is likely to bring down bond yields higher dividend from rbi may reduce fiscal deficit for the government lower government borrowings may lead to increase in corporate lending street is keenly looking at rbis note issued liability to assess the gain from note abolishment in june 2016 note issued liability stood at rs 1707 lakh crore banks bank will benefit from higher casa growth as 190 billion cash gets deposited with them psu banks will be key beneficiary with market share of 76 of the total saving deposit banks with higher casa ratio will benefit more as their cost of funds drops sbi likely to be a key beneficiary with 18 market share and 43 casa ratio