The country’s largest lender State Bank of India last week increased the retail rate for fixed deposits of less than two years by 20 basis points, or 0.2 per cent.
private lender
and Axis increased rates by 35 and 15 basis points, respectively, for the same periods.
And the most aggressive. IDFC First raised its savings deposit rate as a percentage to 6% in May, offering 6% on deposits above Rs 10 lakh, apart from increasing term rates.
Kotak Mahindra hiked its fixed deposit rates by up to half a percentage point this month.
Liquidity Surplus since June 2019
Shanti Ekambaram, Group President-Consumer Banking, said, “We realized that as market rates are ahead of regulatory hikes, savers also need to focus on more reasonable returns.
Bank. “This is in anticipation of future rate hikes; we will see how the market plays out, demand-supply, liquidity in the system and based on that we will take further decisions.”
The RBI has raised its benchmark repo rate twice in the last two months by a cumulative 90 basis points to 4.9%, and has guided for further hikes amid inflationary pressures. Banks have responded with similar amounts, raising their lending rates linked to external benchmarks such as repo. However, there has been a gradual change in deposit rates.
Deposits in India’s banks stood at Rs 165.7 lakh crore in the fortnight ended May 20, registering an increase of 9.3% or Rs 14.1 lakh crore compared to a year ago. The banking system has been facing a liquidity surplus since June 2019 due to a sharp rise in deposits versus loan disbursements, barring the last few fortnights.
The demand for credit is now consolidating, and since deposits are cheaper than raising money from the market, banks are looking at new ideas to attract savers in addition to raising rates.
Floating-Rate FDs
private lender
Introduced India’s first floating-rate fixed deposit, linked to the existing repo rate, to offer customers dynamic returns on fixed deposits ranging from one year to less than three years.
“Floating rate fixed deposit is a kind of FD product, one of the main advantages of this product is that the interest rate revision will happen automatically and will not require any manual intervention by the bank or customers,” said Yes Bank Prashant Kumar, Managing Director said. “The launch of this floating-rate FD has been meticulously thought out and thought out, and is another step towards further enhancing our retail product offering.”
Kunal Shah, Senior Vice President
Said that deposit rates may increase further.
“Retail fixed deposit rates have risen across the board, but are not in line with repo growth,” he said. “The average savings deposit rate cut during the cycle declined by 60 basis points from 3.5% in January 2019 to 2.9% in March 2022. Hence, it will be extended with a lag in the rising interest rate scenario.”