SBI, Axis Bank hike deposit rates

SBI, Axis Bank hike deposit rates

In good news for depositors before the new year, State Bank of India (SBI) and Axis Bank have raised interest rates on fixed deposits by up to 50 basis points (bps) across various tenors.

SBI has increased rates across various tenures, excluding FDs maturing within one year to less than 2 years, 2 years to less than 3 years, and 5 years to 10 years. “We had not increased interest rate for sometime in shorter terms. We had some elbow room available, so we have only calibrated rates,” Dinesh Khara, chairman, SBI told FE. “In longer tenor, we had already increased sometime back so there is no elbow room to increase them further,” he added.

For retail term deposits maturing between seven days to 45 days, SBI has raised the interest rates by 50 bps to 3.5 % from 3% while on deposits of 46 days to 179 days maturity, the interest rate has been increased by 25 bps to 4.75% from 4.5%.

For deposits maturing between 180 days to 210 days, the new rate offered is 5.75% as against 5.25% earlier. The revised rate for deposits maturing between 211 days to less than one year is 6% compared to the existing 5.75%.

The interest rate on term deposits maturing between three years to less than five years has been revised up by 25 bps to 6.75% from 6.5%. The bank has also increased interest rates on domestic bulk deposits (Rupees 2 crore and above) by up to 50 bps.

Axis Bank is now offering FD rates of 3.50-7.10% to the general public on term deposits maturing in seven days to ten years. Banks offer 50 bps more to senior citizen on fixed deposits.

The move to hike deposit rates comes amid tight liquidity in the system which has prompted banks to mobilise funds from money market. The liquidity deficit widened to an 8-year-high of Rupees 2.58 trillion last week on account outflows towards advance tax payments and goods and service taxes.

Banks are mobilising funds to meet their credit growth which has outpaced deposit growth. Credit offtake continued to grow, increasing by 20.8% year-on-year (y-o-y) to reach Rupees 156.2 trillion for the fortnight ending December 1 while deposits rose at 13.4% y-o-y for the fortnight to reach Rupees 198.8 trillion as of December 1, 2023.

The RBI has raised the repo rate by 250 bps since May last year while the weighted average domestic term deposit rates (WADTDRs) on fresh deposits and outstanding deposits rose by 228 bps and 172 bps, respectively, between May 2022 and October 2023.