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SBI's senior citizen depositors were earlier earning 50 bps more than the card rate for all tenures. ICICI, the largest private sector bank, pays 50 bps more to senior citizens for deposits up to two years and offers 75 bps more for deposits of over two years.
The finance ministry was prodding public sector lenders to cut the premium on senior citizen deposits, to reduce overall cost, in turn helping to cut lending rates. The ministry recently ordered a status report on the deposit rates to senior citizens, where it was found most government-run banks offered 50 bps above the card rate.
SBI's new rates will take effect from Friday. The Reserve Bank of India, in its first quarter review of monetary policy in January, had reduced the key policy rate by 25 bps. This was aimed at boosting growth.
SBI's Managing Director and Chief Financial Officer Diwakar Gupta said the rate hike decision had been done keeping in mind the pressure on liquidity in March.
It is more for positioning, he said. Bank branches should be enabled to mobilise funds while competing with other banks, he said, adding SBI still had a surplus liquidity of Rs 55,000 crore.
Asked if SBI would lower the deposit rates after March, Gupta said the bank would monitor the market condition before taking a decision.
SBI has been seeing competition on the deposit front from tax savings instruments and other banks, as its rate is among the lowest. It will now pay 8.75 per cent for all deposits of over a year's maturity. Some banks are paying nine per cent for one-year deposits.
Deposit growth has been sluggish in the current financial year, as high inflation has made channelised funds to non-financial investments such as gold and real estate. RBI's latest data show year-on-year deposit growth till the first week of February was 13.2 per cent as compared to 15 per cent during the same period last year.
Loan growth has been outpacing deposit growth for two years; it grew 16.4 per cent this year as compared to 15.7 per cent in the year-ago period. The central bank has projected 16 per cent growth in credit and 15 per cent growth in deposits for 2012-13.
