The country’s largest lender State Bank of India (SBI) raised interest rates on bulk deposits by 50-140 basis points effective Monday. “Have aligned bulk deposit rates with retail deposit rates. Hike will not impact cost of funds in a significant manner effective today,” PK Gupta, MD, SBI told CNBC TV18. One basis point is one-hundredth of a percentage point. According to him there is enough liquidity in the market but the corporate demand has still not picked up, while credit growth is seen only in retail segment. He also told CNBC TV18 that bank’s deposit rates are very low when compared to industry rates. Bulk Deposit means “Rupee Term Deposits of Rs 1 crore and above”. In January, 2013, RBI has clarified that from now onwards, only “Bulk Deposits will be used and ‘wholesale deposit’ terminology will not be used.
The SBI shares soared 2.5 percent intraday after this announcement. In November last year, India’s largest lender increased interest rates by 1 percentage point across all maturities for bulk deposits greater than Rs 1 crore. It left rates for deposits below Rs1 crore unchanged. Deposit growth in India’s banks has fallen to 8.14% as on 10 November compared to 15.9% a year ago.
The bank brought New Year’s cheer for its customers by reducing its Base Rate as well as the Benchmark Prime Lending Rate (BPLR) by 30 basis points (bps) with effect from January 01, 2018. The revised base rate was reduced from 8.95% to 8.65% for the bank’s existing customers, while BPLR was reduced from 13.70% to 13.40%. Additionally, the bank had decided to extend the on-going waiver on home loan processing fees till March 31, 2018 for new customers keen on buying their dream house as well as other customers looking to switch their existing loans to SBI.
Talking about this development, PK Gupta, managing director – retail and digital banking, SBI, had then said, “The reduction in our base rate is a New Year gift to the bank’s loyal customers as a large number of consumers who have their loan linked to the base rate will be benefitted by decrease in rates. This reduction is part of the bank’s efforts to ensure transmission of reduction in the policy rates in the recent past. Approximately 80 lakh customers will be benefitted by this move.”