SBI hikes bulk deposits rates by 40-90 bps, with immediate effect

All deposits more than 3 years to earn 4.5% rate of interest;m Bajaj Finance increases FD rates by 10 bps

State Bank of India (SBI), the country’s largest lender, has increased interest rate on its bulk term deposits (Rs 2 crore and above) by 40-90 basis points, with effect from May 10. Bajaj Finance, a non-banking finance company, has also increased fixed deposit rates by upto 10 bps.

The increase in interest rate on deposits comes close on the heels of the monetary policy committee (MPC) sharply revising the benchmark repo rate upwards by 40 basis points to 4.40 per cent in an off-cycle meeting to tame rising inflation.  

The maximum increase by SBI is 90 basis points, in the 5–10-year tenure and three years to less than 5 years’ tenure. Consequently, the interest rates in these two buckets have moved up to 4.50 per cent as against 3.60 per cent earlier, according to the bank’s website.

Bulk deposits of two years to less than 3 years’ tenor have been hiked by 65 basis points to 4.25 per cent from 3.60 per cent earlier. Further, bulk deposits for 46 – 179 days’ tenor and 180 – 210 days’ tenor will fetch an interest rate of 3.50 per cent as against 3 and 3.10 per cent earlier, respectively. Similarly, deposits with 211 days to less than a year tenor will have an interest rate of 3.75 per cent

Speaking on the hike in bulk deposit rates, a senior SBI executive said, revision in bulk deposit rates is in line with the hike in the policy repo rate. There is clear indication of liquidity in the system coming down over a period of time and deposit rate hike on bulk money is sort of a preparation to avoid challenges on the resources front in the coming months, he said.

“Bulk counters have become active again, the system has been flush with funds for the last two years but the picture will change as RBI incrementally withdraws accommodation,” the executive added.

Before the rate hike by MPC, interest rates were at the lowest level, resulting in savers earning negative real returns with inflation hovering over the 6% mark. The hike in deposit rates has come as a welcome change for the savers.

Interestingly, SBI had hiked its marginal cost-based lending rate (MCLR) upwards by 10 basis points last month, even before the repo rate hike by MPC.

Bandhan Bank, Kotak Mahindra Bank, Jana Small Finance Bank, Punjab National Bank, and Union Bank of India have increased interest rates on fixed deposits across multiple tenor baskets for retail customers, following MPC’s decision.

Bajaj Finance raised interest rates by upto 10 basis points on its fixed deposits (upto Rs 5 crore) for tenor between 36 months to 60 months, effective from May 10. The revised interest rates will be applicable to fresh deposits as well as renewals of maturing deposits. Accordingly, deposits between 36 to 60 months will earn a return of 7 per cent. Deposits between 12 and 23 months will continue to fetch an interest of 5.75 per cent while deposits between 24 – 35 months will earn an interest rate of 6.40 per cent, as was the case earlier.