Mumbai: Indian lenders have intensified efforts to garner retail deposits through special plans that offer savers at least 25-30 basis points more than current commitments of comparable tenures, signalling policy interest rates will remain elevated for some time now.
SBI, Bank of Baroda, Indian Overseas Bank, Union Bank of India and Bank of Maharashtra have started deposit plans offering 7.25% to 7.30% on investments stretching from 399 to 444 days. These banks are offering an additional 50 basis points for senior citizens. The move to raise deposit rates comes within a fortnight of the Reserve Bank of India’s (RBI’s) interaction with banks.
Narrowing the Gap
The regulator had directed bank CEOs to narrow gap between deposit and credit growth. The latest RBI data showed bank credit rose 14% on-year as of June 28, while deposits rose 11%.
Experts said that banks have been offering these peak rates on shorter tenures on expectations that the rate cycle, which was earlier expected to turn toward the latter half of this calendar year, would eventually begin reversing as inflation stays durably within the central bank’s legally mandated tramlines.
“Banks are offering higher rates for less than two years tenure. So when the interest rate cycle turns, banks would not want to be stuck with high-cost liabilities,” said Anil Gupta, senior vice president of the financial sector at ICRA Ratings.
However, in a recent media interaction, RBI governor Shaktikanta Das signalled that rates would remain alleviated for some time.
“The overall economic environment globally and in India is so uncertain… I think it is too early to talk about an interest rate cut,” he said on July 11.
Lenders are finding it difficult to raise retail deposits and have thus launched a limited-period scheme, said a treasury head from a commercial bank.
Bankers say the special rate schemes are based on the assumption that if credit growth continues at 14-16%, they will have to offer better interest rates to mobilise deposits.
SBI’s Amrit Vrishti is offering 7.25% for 444-day deposits, while Bank of Baroda’s Monsoon Dhamaka plan is paying 7.25% for 399 days.
Indian Overseas Bank is paying 7.30% for 444 days, and Bank of Maharashtra depositors will receive 6.90% on 200 days, and 7.10% on 400 days of deposits.
