ICICI Bank, RBL, Axis, IDFC First raise deposit rates to meet credit growth

Revisions mainly introduced for high-value deposits of Rs 2 cr and above; Continuous rate hikes over time raise concern about sustainability of healthy net interest margins

With credit growth continuing to outpace deposit growth by a long margin, several banks, including ICICI Bank, RBL Bank, Axis Bank and IDFC First Bank have revised deposit rates in order to mobilise funds.

Effective Monday, private sector lender ICICI Bank, announced on its website fixed deposit interest rates for deposits worth Rs 2 crore and above but less than Rs 5 crore. The bank is offering a peak rate of 7.15 per cent for general deposits maturing in 15 months to less than 18 months and for those maturing in 18 months to two years.

According to RBL Bank’s website, effective January 19, the lender has revised interest rates on deposits below Rs 2 crore. It is offering a peak rate of 7.55 per cent for general deposits under three maturity brackets – 453 to 459 days, 460 to 724 days and 725 days.

Effective January 20, Axis Bank said on its website that it is offering a peak rate of 7.60 per cent for six maturity brackets of deposits worth Rs 2 crore but less than Rs 5 crore. The private lender is offering 7.60 per cent for deposits maturing broadly in one year to 15 months.

Another private lender, IDFC First Bank, said on its website that effective January 18, it is offering a peak rate of 7.55 per cent on deposits of Rs 2-5 crore maturing in 366 to 399 days.

IDFC First Bank is offering the rates for domestic, NRE, NRO deposits, where premature withdrawal will not be allowed for sums between Rs 2 crore and Rs 25 crore.

Latest Reserve Bank of India data showed that as on December 30, 2022, bank credit growth was at 14.9 per cent while deposit growth was at 9.2 per cent. Over the past few months, banks have sharply raised deposit rates as well as issued bonds in order to raise funds and fund the aggressive loan growth.

While this has raised questions about whether banks would be able to sustain healthy net interest margins, several lenders have expressed confidence in doing so in recent post-earnings conferences.

RBL Bank’s MD, CEO R Subramaniakumar said to Business Standard last week that the bank was confident of maintaining its net interest margin in the current range of 4.7-4.8 per cent despite the rise in deposit rates.

ICICI Bank’s senior management said on Saturday that the lender had been able to utilise its existing liquidity and hence boost deposits in the previous quarter. The bank, which has a Liquidity Coverage Ratio of 123 per cent in Oct-Dec, is confident that its loan growth would not be constrained by deposits, executive director Sandeep Batra had said.