ICICI Bank on Friday raised interest rates on some fixed deposits, effective August 19. The move follows the industry trend where banks are increasing rates to garner more deposits to support the credit growth.
ICICI Bank has set the rates on retail fixed deposits ranging from one year to five years between 5.50% and 6.10%, with rates on one-year deposit being 5.50%. The bank will offer an interest rate of 6.05% on bulk deposits of one-year tenure.
Separately, Punjab National Bank (PNB) has set the interest rate for retail deposits maturing in 405 days at 6.10% with effect from August 19. This is the highest interest rate offered by the bank in the retail deposit category. The bank on Wednesday increased the interest rate on some fixed deposits. The rate on deposits maturing in one year has been raised to 5.50%.
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Earlier this week, State Bank of India (SBI), HDFC Bank and PNB raised interest rates on deposits. SBI and Bank of Baroda have launched special Independence Day deposit schemes offering higher interest rates.
While banks’ credit growth stood at 12-15% in June and July, deposit growth is lagging the credit growth. As of fortnight ended July 29, deposits increased by 9.1% YoY to Rs 169.7 trillion, according to RBI data. Banks are increasing issuances of certificate of deposits (CD) to support credit offtake, with outstanding CD issuances amounting to Rs 2.5 trillion in the fortnight ended July 29, the RBI said in the August bulletin.
The transmission of policy rate hikes is higher for lending rates compared to retail term deposit rates, the RBI observed, adding that since the liquidity in the system has started normalising, banks have started aggressively raising their bulk deposit rates.