Banks, starved of liquidity, are competing with each other in offering attractive interest rates on fixed deposits.
On Tuesday, IndusInd Bank and Lakshmi Vilas Bank increased interest rates on fixed deposits by 25-50 basis points.
A fixed deposit maturing between one year and two years will now fetch 9 per cent to 9.5 per cent.
For 400 days or 600 days schemes, the banks are offering 9.5 per cent and 9.75 per cent, respectively. For senior citizens, the rates are as high as 10 per cent.
While the demand for loans is rising rapidly, banks have not been able to mobilise enough funds at affordable rates to support growth. “The gap between credit growth and deposit growth is increasing,” said J P Dua, chairman and managing director, Allahabad Bank.
| PEAK DEPOSIT RATES OF SOME BANKS | ||
| Bank | Rate (%) | Tenure |
| Lakshmi Vilas | 9.75 | 600 days |
| IndusInd Bank | 9.50 | 400 & 999 days |
| SBI | 9.00 | 555 & 1000 days |
| ICICI Bank | 9.00 | 590, 790 & 990 days |
| HDFC Bank | 9.00 | 2 yr 16 days |
| Bank of India | 8.50 | 1 yr to less than 2 yrs |
| Bank of Baroda | 8.60 | 444 days |
According to the Reserve Bank of India (RBI), credit growth was 23.7 per cent while deposit growth lagged at 14.7 per cent as on December 17, 2010. It has projected 18 per cent and 20 per cent growth in deposits and credit, respectively, for 2010-11.
Banks on Tuesday borrowed around Rs 77,000 crore from RBI’s repo window. The kiquidity deficit has come down in January and is now less than Rs 1 lakh crore. The deficit was more than Rs 1 lakh crore during the last two months of 2010, much above the central bank’s comfort zone of Rs 50,000 crore.
The third quarter was a quarter of increases in both lending and deposit rates. But the effect of deposit rate increases has not set in yet. Bankers said they had to wait for the fourth quarter to see the results.
“Deposits grew around two per cent sequentially in the third quarter as a result of rate hikes,” said S S Ranjan, chief financial officer, State Bank of India.
