SBI raises lending rates, HDFC Bank and BoB increase deposit rates

Moves follow RBI's 90-bp repo rate increase in a little over a month

A week after the Reserve Bank of India’s (RBI’s) six-member monetary policy committee (MPC) increased the repo rate – the rate at which it lends to commercial banks – by 50 basis points (bps), State Bank of India (SBI), the country’s largest lender, on Wednesday increased its marginal cost of funds-based lending rate (MCLR) by 20 basis points across all tenors, with immediate effect.

The country's largest private-sector lender, HDFC Bank, and public-sector lender Bank of Baroda increased the rates on their fixed deposits of under Rs 2 crore – by up to 25 bps and 40 bps, respectively – with effect from Wednesday.

SBI’s overnight, one-month and three-month MCLR now stands revised to 7.05 per cent from 6.85 per cent earlier, according to its website. Similarly, the six-month MCLR stands revised to 7.35 per cent, one-year to 7.40 per cent, two-year to 7.60 per cent, and three-year to 7.70 per cent. The lender has also raised its external benchmark-based and repo-linked lending rates by 50 bps.

These revisions follow the RBI’s decision to raise the repo rate by 90 bps in a little over a month in order to tame inflation, which has been breaching its upper tolerance limit for the past five months. SBI has hiked its MCLR by 40 bps since April.

As of December 2021, a little over 39 per cent of loans in the banking system were linked to the external benchmark and 53 per cent to MCLR, according to RBI data.

On Tuesday, SBI raised its interest rates on retail fixed deposits by 15-20 bps on some tenors with effect from June 14. Simultaneously, it also raised interest rates on bulk term deposits by 50-75 bps.

Meanwhile, HDFC Bank’s increase in interest on fixed deposits of less than Rs 2 crore was for various tenors. According to its website, fixed deposits of tenors between 6 months and 9 months will carry an interest rate of 4.65 per cent, against 4.40 per cent earlier. Similarly, those of 9 months to less than a year will earn 4.65 per cent interest, against 4.50 per cent earlier. And, those between 1 year and 2 years will earn 5.35 per cent, against 5.10 per cent earlier.

Bank of Baroda also revised the savings rate by 5-10 basis points depending on outstanding balance. And, IDBI Bank increased interest rate on retail term deposits of less than Rs 2 crore by 10-25 bps, depending on tenor, with effect from Wednesday.

Consumer financier Bajaj Finance has increased interest rates on fixed deposits by up to 20 bps for tenors between 24 and 60 months (except 44 months). And, Kotak Mahindra Bank last week raised its interest rates on savings bank accounts and fixed deposits. It said daily balance above Rs 50 lakh in savings accounts would now earn an interest of 4 per cent annually, against 3.5 per cent earlier.

The firsts to hike

• SBI: On retail term deposits by 15-20 bps for some tenors 

• HDFC Bank: On fixed deposits (FD) (<Rs 2 crore) by up to 25 bps for some tenors

• Bank of Baroda: On FD (<Rs 2 crore) interest rates by up to 40 bps

• IDBI Bank: On retail term deposit by 10-25 bps depending upon the tenor

• Kotak Mahindra Bank & Bajaj Finance have also hiked their deposit rates