Bank of Baroda (BoB) on Friday became the second large public-sector bank (PSB) to raise interest rates on retail deposits. Term deposits of under Rs 1 crore will now earn 10-35 basis points (bps) more than earlier.
Bank of Baroda (BoB) on Friday became the second large public-sector bank (PSB) to raise interest rates on retail deposits. Term deposits of under Rs 1 crore will now earn 10-35 basis points (bps) more than earlier. The rate on deposits with a maturity of one year has been raised by 15 bps to 6.6%. The corresponding rate at State Bank of India (SBI), HDFC Bank and ICICI Bank are 6.4%, 6.75% and 6.6%, respectively. BoB’s larger peer Punjab National Bank (PNB) also offers 6.6% for one-year retail deposits, while private lender Axis Bank offers 6.75%. Two-year and three-year deposits at BoB will also yield 6.6%, up from 6.5% earlier. On February 28, SBI raised interest rates on retail fixed deposits from 10-50 bps for the first time in over three years. The move was a precursor to a hike in SBI’s marginal cost of funds-based lending rates (MCLRs). BoB has not raised its MCLRs ever since the pricing framnework was introduced in April 2016. Interest rates in the banking system are expectedly rising, following months of hardening in bond yields. Corporates are also returning to banks for financing as a result of funds getting more expensive in the money markets. In addition, subdued growth in deposits is also helping push rates up. As on February 16, deposit growth stood at 5.9% and the credit-deposit (CD) ratio was 74.7%, up from 70.4% a year ago. ICRA Ratings said in a note on Thursday, “This improved CD ratio, coupled with normalised liquidity conditions, has already translated in an increase in bulk deposit rates and some banks hiking the retail deposit rates during current month.”