The Reserve Bank of India, last month, decided to raise the criteria for 'bulk deposits' for banks to Rs 2 crore from Rs 1 crore previously in order to provide more operational freedom to lenders to raise funds. These deposits usually earn a marginally higher interest rate than on smaller-amount fixed deposits for similar maturity periods. For instance, deposits of between Rs 2 crore and under Rs 5 crore at ICICI Bank earn 7.6% interest for a tenor of 1 year to 389 days. But retail deposits for the same tenure earn a much lower 6.9%
And here's the icing on the cake - banks have now been given the discretion to offer differential rate of interest on bulk deposits as per their requirements and asset-liability management (ALM) projections. In other words, you can expect negotiated rate for deposits over Rs 2 crore.
Take a look at what the top banks in the country are offering on bulk deposits currently:
Note that senior citizens earn 50 basis points higher interest. Also, the private banks offer a choice between fixed deposits with premature withdrawal facility and those without this option. The non-withdrawable term deposits earn a comparatively higher interest rate.
Here is a detailed look at the various tenors offered by these banks:"Over the first nine months of this fiscal, banks have already raised deposit rates by an average of 40-60 basis points. We expect banks to sharpen focus on deposit mobilisation over the medium term through attractive rate offerings across tenors in both bulk and retail segments," Rama Patel, Director, CRISIL Ratings had said in a recent statement.
According to CRISIL, bank credit in India would grow at a pace of around 13-14% on average between fiscals 2019 and 2020, significantly faster compared with the 8% seen in FY18, which would force a change in the deposit mobilisation plans of banks over the medium term.
"To meet this credit growth, banks will have to raise about Rs 25 lakh crore over the two fiscals. While Rs 5-6 lakh crore is expected to become available through the release of statutory liquidity ratio (SLR) funds, about Rs 20 lakh crore would need to be raised through fresh deposits," said the ratings agency, adding, "It would also put upward pressure on the interest rates bank offer on deposits."
And that is great news for those looking towards fixed deposits to beat volatility in the financial markets in election year. In addition, benign inflation - which basically pushes up the real rate of interest - has also renewed customer interest in this savings option.
(With PTI inputs)