More banks enter deposit rate battle

The battle for deposits looks set to intensify with Bank of Baroda, Kotak Mahindra and Syndicate Bank increasing interest rates on fixed deposits.

A number of other banks such as Bank of India, Axis Bank and Union Bank of India are likely to increase deposit rates in the coming days.

Public sector Bank of Baroda would offer 25-50 basis points (bps) more on fixed deposits (FDs) across maturities above 90 days from August 2, said Executive Director R K Bakshi.

Mumbai-based private sector lender Kotak Mahindra Bank today said it had increased deposit rates by 25-50 bps across nine maturities ranging from 15-30 days to 701 days and above but less than two years.

Kolkata-based public sector lender Syndicate Bank has raised deposit rates by 50-75 bps across various maturities.

The latest round follows an increase in rates by HDFC Bank, Central Bank of India and Lakshmi Vilas Bank earlier this week.

On Wednesday, Bank of India Executive Director M Narendra said the bank was likely to increase deposit rates by 25-50 bps in the near future. And, earlier this week, State Bank Chairman O P Bhatt indicated the bank might look at revising its deposit rates by August-September.

While deposit rates are rising, most bankers are of the opinion that lending rates will follow with a lag. However, some like HDFC Bank said they might raise lending rates sooner. “We may (do so) in the next few weeks, depending on the market condition,” HDFC’s Paresh Sukthankar told Business Standard earlier this week.

The pace of deposit growth for the banking system has been slower than credit growth since the beginning of the current financial year and is beginning to worry bankers.