KOCHI: While lending rates are slowly inching down following the Reserve Bank of India’s (RBI) two consecutive 25-basis-point repo rate cuts, fixed deposit rates (FD) aren’t following suit – at least not across the board.
In fact, some smaller lenders are bucking the trend and hiking deposit rates in a bid to stay competitive.
Suryoday Small Finance Bank (SSFB) has made a bold move by raising FD interest rates by up to 41 basis points for deposits below Rs3 crore, at a time when most major banks — including State Bank of India, HDFC Bank, and ICICI Bank — are trimming rates. SSFB’s revised rates now go up to 9.10% for senior citizens on select tenures, while regular customers can earn as much as 8.60%.
This divergence points to a broader market dynamic — large banks are in a better position to mobilise deposits without offering significantly higher rates, but smaller banks are under pressure to attract funds to maintain their asset-liability balance.
Officials from a few small- to mid-sized banks told businessbenchmark.news that they are weighing the option of raising deposit rates to attract funds. “It’s a tricky time — we need to have the right strategies in place,” said a senior official at a small finance bank.
Deposits in good demand
“Deposits are in big demand. The big banks are in pole position when it comes to garnering them. But for smaller banks, especially small finance banks, better interest rates remain the only tool to stay relevant,” said a senior banker at a mid-sized private bank.
In the past few months, several banks had aligned their deposit rates with falling lending rates, especially as margins were squeezed. But now, with liquidity tightening and the competition for deposits intensifying, some banks outside the top tier are feeling the pinch — and responding by reversing course.
For retail depositors, especially those with smaller savings, this trend opens up an opportunity. All fixed deposits up to Rs5 lakh per depositor per bank are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). This means that even if a bank is not a household name, deposits within the insured threshold remain fully protected.
“As long as your deposit is within the insured limit, there’s no reason not to consider banks offering higher returns,” said a financial advisor. “It’s a good time for small savers to shop around.”
With more small and mid-sized lenders expected to follow Suryoday’s lead, the market may be witnessing the early signs of a reversal in deposit rate trends — even as lending rates continue to cool.
