Bank of Baroda, BoM launch deposit schemes to fund credit demand

SBI to follow suit with 444-day plan at 7.25%

Over a week after Reserve Bank of India (RBI) governor Shaktikanta Das highlighted persistent gap in deposit and credit growth in a meeting with CEOs of public and private sector banks, two state-run lenders — Bank of Baroda (BoB) and Bank of Maharashtra (BoM) — have floated special schemes to garner deposits to fund credit demand.

Country's largest lender SBI is set to unveil a new 444-day monsoon special retail deposit scheme with 7.25 per cent interest to boost its deposit mobilisation, a senior SBI executive confirmed.

Issuing a statement, BoB said its special scheme dubbed “the bob Monsoon Dhamaka Deposit Scheme” comes with two tenor buckets — offering interest rates of 7.25 per cent per annum for 399 days and 7.15 per cent per annum for 333 days. The scheme opened on Monday and it would be for retail deposits below Rs 3 crore.

Senior citizens will earn an additional interest rate of 0.50 per cent for both buckets. Further, Non-Callable Deposits will get 0.15 per cent extra, BoB said. The bank’s deposits grew by 8.83 per cent Y-o-Y to Rs 13.06 trillion as of June 30, 2024. BoB’s deposit growth was lower than the industry growth rate of 10.64 per cent as of June 28, 2024.

Pune-based BoM also floated a special scheme with four buckets for deposits up to Rs 10 crore. For 200 days, it would offer 6.90 per cent rate, for 400 days, the rate is 7.1 per cent, for 666 days it’s 7.15 per cent and for 777 days the rate is 7.25 per cent, according to the bank’s website.

At the CEOs’ meeting on July 3, RBI governor Shaktikanta Das had flagged the issue of persisting gap between credit and deposit growth. The regulator had also highlighted the need for banks revisiting business models in light of the wide gap.

Deposit growth dipped further during the last reporting fortnight to 10.6 per cent Y-o-Y, latest RBI data showed. Loan growth was 13.9 per cent till June 28, 2024.

CareEdge Ratings said in a note that banks are expected to take additional efforts to shore up their liability franchise and ensure that deposit growth does not constrain the credit offtake.

Many banks are taking the infrastructure-bond route to mobilise funds. SBI raised Rs 20,000 crore through infrastructure bonds to date in the current financial year. BoM is also looking to raise up to Rs 10,000 crore via these bonds.

The rise in cost of funds has driven banks to pass the same on to borrowers to protect margins.

SBI has hiked its marginal cost of funds-based lending rate (MCLR) across buckets by 5-10 basis points with effect from Monday. Most loans to corporates, including SMEs, are priced with MCLR as a benchmark. The lender hiked the rate for one month MCLR by 5 basis points to 8.35 per cent. For one year, MCLR has been hiked by 10 basis points to 8.85 per cent. For the three-year period, it has been raised by 5 basis points to 9.0 per cent, according to data uploaded on SBI website.

Country’s largest private sector lender HDFC Bank has revised its MCLR upwards by up to 10 basis points on some tenures from July 8, 2024. The bank’s MCLR now ranges from 9.05 per cent to 9.40 per cent. The one-year, two-year, and three-year MCLR stand at 9.40 per cent.