State Bank of India (SBI) on Wednesday hiked its retail deposit rates by 10-50 basis points (bps) across various maturity baskets, a move that is likely to be followed by other banks.
One basis point is a hundredth of a percentage point.
In an announcement on its website, India’s largest bank said, effective Wednesday, 7 – 45-day deposits will earn an annual interest rate of 5.75 percent, up from 5.25 percent earlier.
On 1-year deposits, customers will now earn 6.40 percent, as against 6.25 percent earlier, while those desposits maturing between two years and 10 years will earn 6.50 percent, compared with 6 percent earlier. Senior citizens will, accordingly, earn 7 percent on their deposits, up from 6.50 percent earlier.
The new rates are effective February 28, 2018.
“The proposed rates of interest shall be made applicable to fresh deposits and renewals of maturing deposits,” SBI said in its notification.
SBI has also raised its interest on bulk or wholesale deposits above Rs 1 crore.
Other banks such as Punjab National Bank and Karnataka Bank have also hiked their deposit rates.
Typically, a deposit rate hike is followed by a lending rate hike. This indicates that the interest in the economy has moved up even as the Reserve Bank of India (RBI) in February kept its policy rates unchanged for the third time.
Axis Bank has already hiked its benchmark marginal cost of funds based lending rate (MCLR) by 10 bps in the 3-month to 3-year buckets effective from February 17.
Consequently, the bank’s three month MCLR is now 8.15 percent and six months at 8.30 percent while the 1-year rate is 8.40 percent.
MCLR is closely linked to the costs banks pay on their deposits and hence a higher MCLR is an indication in the uptick in bank deposit rates.
Deposit rates have been hiked as seen in the last couple of months as banking sector liquidity has dried up.moneycontrol