MUMBAI:  Ahead of the festive season, many banks in India have hiked their deposit rates to fund the demands for loans. This is also in consonant with the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) stance in the last 3 meetings. The RBI had hiked the repo rate by 140 basis points.

Banks will be able to finance the demand for loans throughout the holiday season thanks to the increase in deposits. "Given that the banking system's liquidity is becoming more constrained, banks are anticipated to increase deposit rates in the future to encourage deposits and support this expanding credit offtake. Banks have already started selectively hiking rates for specific tenures and categories, "the CareEdge Senior Director, Sanjay Agarwal, said.

Deposit growth has been significantly outpaced by bank credit growth, which has remained in double digits. While the low base impact, small ticket size loans, higher working capital needs as a result of higher inflation, and a shift to bank borrowings due to high capital market returns continue to be the main drivers of credit expansion.

The largest state-owned bank, State Bank of India, hiked its deposit rate on deposits maturing between 180 and 210 days by 15 basis points, from 4.40 to 4.55 percent, as evidenced by the statistics provided by CareEdge.

The SBI FD interest rates have also increased by 15 basis points for all other tenures. For a period of up to a year, bulk deposit rates have increased by 25 to 50 basis points. The rates have increased by rates ranging from 75 to 125 basis points for more than a year. Indian Overseas Bank raised deposit rates by 10 basis points for retail term deposits with maturities of 444 days or more and 3 years or more. 

The deposit rates at Indian Bank and Punjab National Bank have been increased by 5 to 15 basis points.

RBI seeks public input on alterations to payment systems

Union Cabinet approves interest subvention for banks

RBI tightens norms on loan recovery agents by banks, NBFCs