 "SBI hikes interest rate on savings deposits above Rs 10 crore by 30 bps")
The country’s largest lender, State Bank of India (SBI), has hiked interest rates on savings bank deposits of over Rs 10 crore by 30 basis points, with effect from October 15. Accordingly, deposits of Rs 10 crore and above will attract an interest rate of 3 per cent from now as opposed to 2.70 per cent earlier.
However, deposits up to Rs 10 crore will continue to attract 2.70 per cent interest rate, the lender said in a statement today.
Deposit rates have not moved in tandem with lending rates despite the monetary policy committee (MPC) of the Reserve Bank of India (RBI) raising the benchmark repo rate by 190 bps since May this year.
This has weighed on the deposit growth seen in the economy so far. According tp the latest RBI data, for the fortnight ended September 23, deposits grew by 9.2 per cent year on year (YoY) but credit growth was 16.4 per cent. The credit-deposit growth gap has been widening for the past few months, exacerbating analysts' concerns that slow deposit growth could act as a constraint for loan growth going forward.
But with banking system liquidity shrinking as RBI pulls out the excess liquidity to tame inflation and high credit growth in the economy, industry experts had suggested that sooner rather than later banks have to increase deposit rates to garner durable liquidity to fund credit growth in the system.
According to RBI’s October bulletin, banks raised their term deposit rates in H1 of 2022-23 amid moderation in systemic liquidity. Banks increased their bulk term deposit rates more relative to retail deposit rates. The weighted average domestic term deposit rate (WADTDR) on fresh retail deposits rose by 39 bps during May-August 2022, while the WADTDR on total fresh deposits (both retail and bulk) was up by 100 bps. The median term deposit rate on fresh retail deposits – the prevailing card rates – rose by 26 bps during May-September 2022.
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