After private banks, it is now the turn of large public sector banks to raise interest rates on non-resident (external) rupee (NRE) deposits after the central bank lifted the cap on rates for these deposits.
State Bank of India (SBI) and Bank of Baroda are set to raise NRE deposits rates.
A senior SBI official said, "We are planning to revise the rates on NRE deposits to bring them on a par with domestic rates." Till late evening, the bank had not announced the revised interest rate. The bank currently offers 9.25 per cent for domestic term deposits maturing between one and 10 years.
A senior Bank of Baroda official said the bank had to respond to the rise in NRE deposit rates, as the market was highly competitive. The rise would have cost implications and put pressure on margins. The details are scheduled to be worked out next week. The outstanding NRI (non-resident Indians) deposits base is about Rs 10,000 crore, the official added.
According to a senior official at Union bank of India, the bank had already decided to increase its non-resident deposit rates and would make a formal announcement on this soon.
Bipin Kabra, chief financial officer, Dhanlaxmi Bank, said higher deposit rates would have an impact on net interest margins.
Meanwhile, two Mumbai-based private banks, YES Bank and IndusInd Bank, on Friday increased interest rates on deposits parked by non-resident Indians.