The country's largest lender, the State Bank of India (SBI), has hiked interest rates on fixed deposits of various tenures with effect from today. To begin with, the bank has made its retail deposits - those below Rs 1 crore - across longer maturity baskets more attractive by 5-10 basis points (see table). While interest rates on deposits of tenures longer than two years have gone up by 0.1 per cent, the hike on tenures of 1 year to less than 2 years stands at 0.05 per cent. Senior citizens, of course, earn 50 basis points more across all the revised brackets.
On the other hand, bulk deposits of over Rs 1 crore for tenures of under two years will now earn less interest - rates have been slashed by 30-45 basis points. For instance, the interest rate on such deposits for 46 days to 179 days has been slashed by 45 basis points, or 0.45 per cent.
However, bulk deposits of Rs 1-10 crore as well as over Rs 10 crore will now earn 6.85 per cent, as much as 60 basis points higher, on the 5-10 years tenure.
SBI had last revised interest rates two months ago. The bank's website clarifies that "The proposed rates of interest shall be made applicable to fresh deposits and renewals of maturing deposits". Furthermore, the interest rate payable to SBI Staff and SBI pensioners will be 1 per cent above the applicable rate.
With bank credit now outpacing deposits, it is only a matter of time before other banks follow SBI's lead. According to the RBI's latest data, banks' credit grew by 12.8 per cent year-on-year to Rs 86.60 lakh crore as on July 6. But bank deposits are growing much slower at 8.3 per cent so they now need money for lending, and hence they are making fixed deposits more attractive.
Reacting positively to this development, SBI's stock was trading 4 per cent higher intraday at Rs 299.55 apiece earlier this afternoon.
Edited By Sushmita Choudhury Agarwal