SBI raises deposit rates by 50-150 basis points

Banks are increasing deposit rates further as deposit growth continues to lag. On Monday, State Bank of India, the country’s largest lender, announced a by 50-150 basis points (bps) hike across maturities effective Tuesday.

Now, a one-year fixed deposit will fetch you 7.75%, up from 7% earlier, though still below the inflation rate. Wholesale price index-based inflation came in at 8.58% for October.

India’s second-largest lender, ICICI Bank, has also raised interest rates for various tenors of retail fixed deposits by 25-50 bps, while the Bank of India raised deposit rates by 25-100 bps effective Monday.    

Several banks have hiked deposit rates in the last few days. And those who are yet to effect hikes are expected to do so soon.

“We will call a meeting of the asset-liability committee and take a call. But yes, there is an upward bias on deposit rates,” said RK Bansal, executive director (retail banking), IDBI Bank.

Competition for garnering deposits has heated up as the Reserve Bank of India (RBI) has set a tough target of 18% deposit growth in for banks this fiscal.

“Even we raised our deposit rates a few days back by 50 basis points to 8% for 444 days. There is an acute competition in mopping up deposits,” said N S Srinath, executive director, Bank of Baroda.

As per latest data available with the RBI, for the fortnight ended November 19, bank credit grew 22.70% year on year to Rs 35,58,060.15 crore, while deposits grew just 15.78% year on year to Rs 48,49,605.48 crore.

According to Chaitra Bhat, banking analyst, LKP Securities, banks may miss RBI’s deposit growth target despite increasing their deposit rates because of the liquidity crunch prevailing in the system.