In a move to boost deposits, State Bank of India (SBI), the country’s largest lender, has raised interest rates on short-term retail fixed deposits (FDs) by 25 to 75 basis points. This comes as banks are looking to meet the growing demand for credit from individuals and businesses.
SBI is now offering higher returns of 5.5% for deposits between 46-179 days, up from 4.75% earlier. Senior citizens can earn 6% instead of 5.25% previously in this tenor. For the 180-210 day period, interest rates have increased to 6% from 5.75% for general customers and to 6.5% from 6.25% for senior citizens.
Deposits with tenors of 211 days to one year will fetch an interest of 6.25%, higher than the previous rate of 6%. Senior citizens’ rates for this duration have been raised to 6.75% from 6.5%.
SBI has also hiked FD rates for bulk deposits of Rs. 2 crore and above across different maturity buckets by 10-50 basis points. The move comes as banks need more funds to meet growing credit demand in the economy.
With personal and business loan requirements rising over 15% annually, lenders are under pressure to mobilize more public deposits. SBI’s own domestic term deposits swelled 16.38% in the last fiscal year. The higher interest offered is expected to attract more retail savers to park their surplus funds in FDs.
The rise in deposit rates comes over a year after multiple policy rate hikes. With lending rates also adjusted upwards in tandem, banks are now in a position to pass on a part of the increased cost of funds to depositors as well. This could boost deposit accretion and support credit growth going forward.
