The country’s largest lender State Bank of India (SBI) has increased its fixed deposit interest rates on select tenures. The range of hike in the rates starts from 0.05 per cent (5 bps or basis points) to 0.25 per cent (25 bps). The new interest rates came into effect from May 28, TOI reported.
SBI, in its website, stated that it will offer 6.65 per cent interest on term deposits for one-to-two-year against 6.4 per cent earlier. It also mentioned that deposits between two and three years will fetch 6.65 per cent instead of 6.60 per cent earlier. For senior citizens, one-to-two-year deposits will earn 7.15 per cent interest against 6.9 per cent. FDs between two and three years will also get 7.15 per cent.
These rates are only for deposits below one crore.
For bulk deposits between Rs 1 crore and Rs 10 crore, one-to-two-year deposits will get 7 per cent while senior citizens will earn 7.5 per cent. SBI has kept interest rates same for the deposits above Rs 10 crore. SBI is aiming to expand its fund base further with the revised interest rates. The lender had increased deposit rates by up to 50 bps or 0.5 per cent in February.
Last month, private lender HDFC Bank had also increased term deposits rates. Following the increase, the bank is offering a flat return of 7 per cent on all maturities of over one year, while senior citizens can earn up to 7.5 per cent and bulk depositors (Rs 1 crore and above) get even more.
Other banks are also expected to hike their deposit rates. This is because deposit growth is not keeping pace with the expansion rate in credit.
An increase in deposit rates results in higher lending rates as well, since the marginal cost lending rate (MCLR) is now linked to the change in cost of funds.