SBI, the largest lender in the country, on Wednesday hiked the interest rates for retail and bulk fixed deposits by 0.25% to 0.75%, signalling that the fight among banks to mobilise deposits is still not over.
The bank has increased rates across various tenures, including FDs maturing within 46 days to 179 days, 180 days to 210 days and 211 days to less than 1 year. After the revision, these deposits are offering 5.5% to 7% interest to the depositors.
The lender’s move comes after SBI chairman Dinesh Khara last week said that the bank will step up efforts to mobilise more deposits.
“We have taken several steps to increase our market share in deposits and digitisation, mainly yono app will definitely help in our endeavor to garner more and more quality deposit and at much lower cost,” Khara told analyst in earnings call last week.
“For deposit growth, we have taken multiple initiatives and with sharper focus on our retail network and also focus on our corporate relationship I am quite hopeful that we should be in a position to improve our growth in the year to come,” he added.
Presently, the highest interest rate is available for a tenure of 2 years to less than 3 years. Senior citizens will get an additional 50 basis points on their fixed deposits. The bank last hiked interest rates on FDs on December 27, last year.
SBI’s move may also prompt other banks to hike deposits rates, as lenders are looking to raise funds to meet high credit demand.
The hike in fixed deposits has come amid fierce competition among bank to attract depositors. The demand for loans is high while deposits are not growing fast, which has created pressure among the banks to hike deposit rates.
Helped by strong demand for loans, credit growth has significantly outpaced deposit growth. Credit offtake increased by 20.2% YoY to Rs 164.3 trillion (including the merger of HDFC twins) and 0.7% sequentially for the fortnight ended March 22, according to Care Ratings. Excluding the impact of the merger, the growth stood at 16.3% y-o-y for the fortnight. Deposits rose at 13.5% YoY to Rs 204.8 trillion for the fortnight ended March 22, and sequentially increased by 0.3%. Without considering the merger, deposit growth was 12.9%. Tight liquidity in the banking system in the fourth quarter also pushed banks to raise funds through Certificate of Deposits. Banks raised Rs 32,860 crore in April compared to Rs 1.27 trillion in March through CDs, according to Prime Database.