SBI and IDBI Bank join trend, raise their interest rates on deposits

The country’s largest lender, State Bank of India (SBI), has hiked interest rates on retail term deposits by 15-20 basis points (bps) on some tenors, with effect from June 14. Simultaneously, it has also raised interest rates on bulk term deposits by 50-75 bps.

Private sector lender IDBI Bank also hiked interest rate on retail term deposit of less than Rs 2 crore by 10 - 25 bps depending upon the tenor, with effect from June 15. 

The hike in deposit rates follows the rate action by the monetary policy committee (MPC) in the June meeting. This time, the benchmark policy rate was increased by another 50 bps to 4.9 per cent.

According to the lender’s website, interest rates on retail term deposits (below Rs 2 crore) of 211 days to less than one-year tenor have been increased by 20 bps to 4.6 per cent. It was 4.4 per cent earlier.

Similarly, interest rates on retail term deposits of one year to less than two-year tenor have been hiked by 20 bps to 5.3 per cent. And, for two years to less than three years, it has been hiked by 15 bps to 5.35 per cent.

For bulk deposits (Rs 2 crore and above), the lender has hiked interest rates in the 7 days to 45-day tenor and 46 days to 179 days’ tenor by 50 bps to 3.5 per cent and 4 per cent, respectively.

Similarly, interest rates on 180 days to 210 days’ tenor, 211 days to less than one-year tenor, and one year to less than two years’ tenor have been hiked by 75 bps to 4.25 per cent, 4.5 per cent, and 4.75 per cent, respectively.

Meanwhile, private sector lender IDBI Bank on Tuesday hiked interest rate on retail term deposit of less than Rs 2 crore by 10 - 25 bps depending upon the tenor, with effect from June 15. 

IDBI Bank said it increased interest rate on 91 days to 6 months tenor by 25 bps to 4 per cent; 3 years to less than 5 years tenor by 10 bps to 5.60 per cent; 5 years tenor by 15 bps to 5.75 per cent; more than 5 years to 7 years tenor by 15 bps to 5.75 per cent; and more than 7 years to 10 years tenor by 25 bps to 5.75 per cent. It also increased interest rate on its tax-saving fixed deposit by 15 bps to 5.75 per cent. 

Suresh Khatanhar, deputy managing director of IDBI Bank, said: “In the present scenario of volatility in the financial markets as well as uncertainty globally and rising inflation domestically, fixed deposit remains a most preferred avenue of safe investment in Indian market. The bank offers its highest interest rate of 5.75 per cent and offers additional 75 bps higher interest rate up to 6.5 per cent to resident senior citizen customers across maturities, under its brand “NAMAN Senior Citizen FD”.

Earlier, the six-member rate-setting body had increased the repo rate by 40 bps in a surprise off-cycle meeting to 4.4 per cent.

In May, the lender had increased interest rates on its bulk term deposits (Rs 2 crore and above) by 40-90 basis points, just after the MPC hiked the repo rate by 40 bps.

Lenders have been quick to pass on the increased rates to borrowers as much of the loans are linked to an external benchmark. However, transmission on the liabilities side has been rather slow.

Commenting on the deposit rate hike, Reserve Bank of India (RBI) governor Shaktikanta Das had said, “Normally the transmission takes time. We just announced the rate hike one month ago. It will take about two to three months for the transmission. We do expect rate hikes to be transmitted to the liabilities side, that is, deposits. The bank deposit rates are going up. In any case, when there is credit offtake, banks need to mobilise greater resources by way of offering higher deposit rates to savers.”

Consumer financier Bajaj Finance has also increased interest rates on fixed deposits by up to 20 bps, for tenors between 24 and 60 months (except 44 months).

Last week, Kotak Mahindra Bank hiked interest rates on savings accounts and fixed deposits. The lender said that daily balances in savings accounts above Rs 50 lakh will now earn a 50 bps higher interest rate of 4 per cent per annum from the earlier rate of 3.5 per cent.