Move comes days after RBI governor advised banks to do so.
With competition for funds heating up, State Bank of India (SBI), Bank of India and ICICI Bank have raised interest rates on term deposits.
SBI, the country’s largest lender, did so by 100 to 150 basis points, across maturities. ICICI, the largest private sector lender, did so by 50 basis points.
SBI has steeply increased rates for short-term deposits. For 46-90 days, it will pay 5.5 per cent (per annum) from today as against the four per cent it offered earlier.
It also introduced a new slab of seven to 14 days, for which it will pay three per cent.
For medium and long-term deposits, it has raised rates by 100 basis points. Its peak rate on deposits is now 8.75 per cent.
A senior SBI official said over half the assets had a maturity of 10 years and more, but around 80 per cent of liabilities had a tenure of a year.
Last week, SBI chief O P Bhatt had said 19 per cent year-on-year growth in credit might be possible, while deposit growth was much less. These can be attracted by better pricing; the rate can only go up, Bhatt had said.
Bank of India, another Mumbai-based public sector bank, raised deposit rates by 75-100 basis points for medium-term deposits (one year to less than two years and two years to less than three years) by 75-100 basis points.
South India Bank, a small private sector one, has introduced a 500-day deposit that offers nine per cent. SBI offers 7.75 per cent for year to 554 days.
These increases come a few days after Reserve Bank of India Governor D Subbarao advised banks to do so and also lower lending rates to raise the level of national savings and encourage investment.
According to RBI data, the annual growth in deposits was 15.8 per cent. The deposits outstanding were Rs 48,49,605 crore at the end of November 19. Reflecting the economic growth rebound, bank credit rose 22.7 per cent in the 12 months ended November 19. Banks’ outstanding loan base was Rs 35,580,60 crore, said RBI.
