State Bank of India (SBI) and Bank of India (BoI) on Monday raised their deposit rates by up to 150 basis points across various maturities ensuring higher returns for depositors.
The decision comes close on the heels of various private and public sector lenders, including ICICI Bank, Punjab National Bank and Syndicate Bank raising their deposit rates. The hike by various banks comes in response to Reserve Bank of India Governor D. Subbarao's suggestion that banks give better returns to depositors.
According to an official release here, SBI will offer a maximum interest rate of 8.75 per cent for deposits with a maturity period of 8-10 years, marking an increase of 100 basis points. The highest increase of 150 basis points will be in the case of term deposits with a maturity of 46-90 days, the interest rate being 5.5 per cent as against the existing 4 per cent effective tomorrow [Tuesday].
Bank of India's (BoI) fixed deposits of 1-2 year maturity will now fetch customers 8.25 per cent as compared to 7.5 per cent earlier, an increase of 75 basis points.
At the same time, interest rate on fixed deposits with 2-3 years maturity has been increased by 100 basis points to 8.25 per cent from 7.25 per cent.
The decision of both the lenders to raise fixed deposit rates will prompt other lenders to hike their rates to compete for savers' money. In an effort to tide over tight liquidity situation and increase its credit, ICICI Bank raised interest rates on fixed deposits of various tenors by 25-50 basis points.
Term deposits of 91-180 days maturity will now fetch customers 6 per cent interest as compared to earlier 5.5 per cent, SBI said. At the same time, interest rate on fixed deposits with 181 days to less than one year maturity of SBI has been increased by 125 basis points to 7.25 per cent from 6 per cent.
However, higher deposit rates would make cost of funds dearer for lenders and put pressure on lending rates that may make home, auto and other loans expensive.
