Central Bank ups rates by up to 50 basis point
A day after the Reserve Bank of India (RBI) hiked its short-term policy rates to rein in inflation, country's premier bank State Bank of India (SBI) on Wednesday said deposit rates are likely to move up soon.
Meanwhile, HDFC Bank, a leading private sector bank, raised its deposit rates by 25 to 75 basis points for different maturities. Lakshmi Vilas Bank, a south-based small private sector bank, also decided to increase rates on deposits by 25 to 50 basis points with effect from August 2.
There is an upward bias on the deposit rates, said SBI Chairman O. P. Bhatt here. According to him deposit rates are likely to move up by August-September by at least by 0.25 percentage point.
While hiking the indicative rates on Tuesday, the RBI, in a tactical move, narrowed down the rate corridor by 25 basis points. Instead of raising both its policy rates (repo and reverse repo rates) by an identical margin — it has been the practice since its started the rate tightening cycle this year — the central bank has raised its repo rate by 25 basis points to 5.75 per cent and the reverse repo rate by 50 basis points to 4.50 per cent.
Public sector lender Central Bank of India also increased its deposit rates by up to 0.5 percentage point.
This will be with effect from August 1, PTI reports quoting a source close to the development.
For deposits up to Rs.15 lakh, the rate has been increased from 6.5 per cent to 6.75 per cent for 1-2 years while for 91 days to 179 days, it has been raised from 5 per cent to 5.25 per cent.
For 46-90 days, the rate had been increased from 3.75 per cent to 4.25 per cent, the source said.
For deposits of Rs.15 lakh to Rs.1 crore, the rate had been increased from 4 to 4.25 per cent for 46-90 days.
For a tenor of 1-2 years, the rate has been increased from 6.5 per cent to 7 per cent while for 2-3 years, the rate had been upped from 6.75 per cent to 7 per cent, the source said.
Meanwhile, the term deposit rate of HDFC Bank with maturity in between 91 days and 6 months would be raised by 75 basis points to 5.25 per cent from the existing 4.5 per cent.
For fixed deposits in between nine months and one year, the new rates would be higher by 50 basis points at 6.25 per cent while for the one year and 16 days category it will be 7 per cent, 25 basis points more than the existing rate of 6.75 per cent.
Asked if it would translate into higher lending rate, HDFC Bank Executive Director Paresh Sukthankar said, “It would not immediate, but as we move along short-term lending rates would go up. I do expect the lending rates would reflect this in the next few weeks.”
However, it would not mean change in the base rate which was fixed in the beginning of this month, he said.
Lakshmi Vilas Bank has raised the term deposit rate for 181-270 days by 50 basis points to 6.25 per cent from 5.75 per cent.
At the same time, 271-364-day term deposit would attract an interest rate of 6.5 per cent compared to existing 6.25 per cent while one year to less than two years deposit would also go up by 25 basis points.