In the period going forward, money will get sucked out of the system due to advance taxes to the tune of R60,000-70,000 crore and credit growth is also expected to pick up in the fourth quarter, said Sunil Pant, chief general manager for finance control. Pant added that borrowing by banks through liquidity adjustment facility (LAF) has risen to R1.2 lakh crore in recent weeks, which is above the Reserve Bank of Indias (RBI) comfort level.
With the revision, the interest rate on 1-2 years fixed deposit would go up to 8.75%, from 8.5%. Similarly for 2-3 years, 3-5 years and 5-10 years, fixed deposit rates would increase to 8.75%. The new rates will be effective from March 1, 2013.
Pant also added SBIs deposit rates were very close to post office rates and competing tax savings products like provident fund (PF), which was recently hiked to 8.5% interest on PF deposits for 2012-13, which is 25 bps higher than last fiscal.
The bank currently has surplus liquidity of around R50,000 crore, which has come down from R70,000 crore in September, 2012, Pant said.
The banking system saw a deposit growth of 13.2% year-on-year (y-o-y) to R65,70,871 crore in the fortnight ended February 8, below RBIs projection of 15% growth in FY13. From April 2012 till date, deposits growth has been 7.5% compared with 11.44% in the corresponding period last financial year.
Some private banks like ICICI Bank and Axis Bank have also raised interest rates on deposits by 25-30 bps on longer tenure maturities just before the policy decision by RBI in January.
Pant does not expect net interest margin to be pressured by the move, even though in January SBI had cut lending rates by 5 bps to 9.7%, soon after RBI had cut key policy rates.
In third quarter policy review on January 29, RBI had lowered repo rates by 25 bps to 7.75% and cash reserve ratio by 25 bps to 4% injecting R18,000 crore in the banking system. The repo rate at which RBI lends to banks was eased after a gap of nine months by the central bank to make room for growth.