Banks Hike Deposit Rates Ahead of Festive Season
IANS 18 August 2022
Most banks are increasing their deposit rates for boosting deposits to support rising credit offtake as liquidity in the banking system has narrowed.
The hike in deposit rates is in line with the Reserve Bank of India's (RBI) 50bps (basis points) hike in repo rate in the August monetary policy.
The rise in deposits will help banks to fund the demand for loans during the festive season.
"Going forward, banks are expected to raise deposit rates for boosting deposits to support this rising credit offtake given that liquidity is narrowing in the banking system. Selectively, banks have already been raising rates across certain tenures and categories," said Sanjay Agarwal, senior director, careEdge.
Bank credit growth has remained in double digits handily outpacing the deposit growth whereas credit growth continues to be driven by a low base effect, small ticket size loans, higher working capital requirements due to elevated inflation, and a shift to bank borrowings on account of high yields in the capital market.
Data compiled by CareEdge showed, the largest State-owned bank, State Bank of India (SBI) increased its deposit rate by 15bps on deposits maturing between 180 days and 210 days from 4.40% to 4.55%.
For all other tenures, the SBI fixed deposit (FD) interest rates have also been hiked by 15bps. Bulk deposit rates have been increased by 25bps-50bps for period up to one year. For more than one year, the rates have been hiked by rates ranging from 75bps-125bps.
Indian Overseas Bank increased deposit rates by 10bps for 444 days and three years and above periods for the retail term deposits.
Indian Bank and Punjab National Bank have also hiked their deposit rates by 5bps-15bps.
On the other hand, among private banks, HDFC Bank increased interest rates by around 15bps on FDs greater than Rs5 crore in August. ICICI Bank increased interest rates on fixed deposits from Rs2 crore to Rs5 crore in August.
Kotak Mahindra Bank has also increased rates by 15bp for select tenures for deposits up to Rs2 crore in August, CareEdge data showed.
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