ICICI, Axis, IDFC First Bank hike deposits rate for above Rs 2 crore

Hike rates after credit growth expands 15.3%

Amid a growing need for banks to mobilise deposits in order to fund strong credit growth, private sector lenders ICICI Bank, Axis Bank and IDFC First Bank have increased interest rates on deposits worth Rs 2 crore and above.

Effective Monday, ICICI Bank is offering interest rates in the range of 3.5-6.05 per cent on deposits of Rs 2 crore to less than Rs 5 crore. The peak rate of 6.05 per cent is being offered on deposits of tenures ranging from 1 year to 389 days, to 3 years, 1 day to 5 years.

For deposits worth Rs 2 crore to less than Rs 5 crore, Axis Bank is offering a peak rate of 6.5 per cent for tenures ranging from 1 year to 5 years to 10 years effective from Monday. For deposits worth Rs 50 crore to less than Rs 100 crore and Rs 100 crore and above, Axis Bank is offering a peak rate of 6.90 per cent.

IDFC First Bank also announced on its website that effective Monday, it would offer interest rates in the range of 4.5-7 per cent for deposits worth Rs 2 crore to Rs 5 crore. The private bank is also offering the revised range for deposits worth Rs 5 crore to Rs 25 crore. The private lender said rates were hiked to stay competitive.

“We have noticed that in general, interest rates have increased in the market by about 25-30 bps owing to liquidity conditions. We too have increased interest rates for deposits > Rs. 2 crore bracket, effective today, by about 25 bps, in order to stay competitive and in line with the market,” a spokesperson from IDFC First Bank said to Business Standard.

“We have noticed that the Rs. 2 crore and above bucket is often availed by HNI customers and senior citizens as well. We have a high percentage of retail deposits; our retail deposits have increased at a 3-year CAGR of 73% and we are comfortable in this space,” IDFC First Bank’s spokesperson said.

Bank credit expanded 15.3% year on year as on August 12, latest data released by RBI showed. Deposit growth has been lagging, which grew by 8.5 per cent during the period.

At present, the country’s largest private lender HDFC Bank is offering a peak rate of 6.10 per cent for deposits worth Rs 2 crore to less than Rs 5 crore. The peak rate is however, only being offered for the tenure of 3 years and 1 day to 5 years. The highest rate for most other tenures offered by the bank is 6.05 per cent.

In comparison, the country’s largest lender State Bank of India is offering a peak rate of 6 per cent for deposits worth Rs 2 crore and above. 

Within the private sector space, for deposits worth Rs 1 crore to less than Rs 5 crore where premature withdrawal is not allowed, IndusInd Bank is offering a peak rate of 6.85 per cent.

The steps taken by banks to raise deposit rates come at a time when the liquidity surplus in the banking system has sharply reduced, exerting pressure on lenders to garner fresh deposits to finance fresh loans.

In the previous week, the average liquidity surplus in the banking system was around Rs 73,000 crore, far lower than a surplus of around Rs 7 lakh crore in April.

Demand for loans is particularly seen strong during the festive season and the wide gap between credit growth and deposit growth could result in banks taking even more steps to attract deposits.

“As liquidity in the system has started normalising, banks have started raising their bulk deposit rates aggressively,” the RBI noted in the August 2022 edition of its Bulletin.

Addressing the media during the RBI’s policy statement earlier this month, Governor Shaktikanta Das had said that banks cannot always rely on the central bank's money and they must mobilise deposits to fund credit offtake in the economy.