KOCHI: Several leading banks have gone against the grain of monetary policy by raising or holding fixed deposit (FD) interest rates, even as the Reserve Bank of India (RBI) has cut the repo rate by a cumulative 100 basis points since February this year.
The move signals an active push by lenders to attract retail deposits at a time when falling interest rates should ideally have triggered a decline in deposit returns.
Among those bucking the trend is IndusInd Bank, which revised its retail FD rates upwards with effect from April 29. For deposit tenures of one year and three months to less than one year and four months, the bank now offers an interest rate of 7.75 per cent to regular depositors and 8.25 per cent to senior citizens.
These are among the highest rates currently available across the banking sector.
Punjab National Bank (PNB) too, while cutting FD rates on select tenures starting June 1, raised rates on others. For a 390-day deposit, it now offers 6.70 per cent to general depositors and 7.20 per cent to senior citizens.
Eyeing long-tenure deposits
The bank appears to be targeting long-tenure deposits with slightly higher returns, despite the broader direction of policy easing.
Federal Bank is offering 6.85 per cent to regular customers and 7.35 per cent to senior citizens on a 444-day deposit. These rates came into effect on June 12.
Union Bank of India mirrors these returns on a 456-day deposit, also effective from June 12.
Private sector players are showing similar patterns. HDFC Bank offers 6.60 per cent for deposit tenures between 15 to 21 months, and 7.10 per cent for senior citizens.
ICICI Bank provides the same rates – 6.60 and 7.10 per cent – for tenures between two to five years. Kotak Mahindra Bank offers 6.60 per cent for periods ranging from 391 days to 23 months.
The country’s largest lender, State Bank of India (SBI), offers a relatively modest 6.45 per cent for deposits with tenures of two to three years, while senior citizens are eligible for an extra 50 basis points.
Divergence from policy rates
This divergence from the monetary policy direction suggests that several banks are still keen on shoring up their deposit base, perhaps in response to rising credit demand or tighter liquidity forecasts.
Analysts also point out that with equity markets turning volatile, banks may be seeing fresh appetite among risk-averse savers for fixed-income products.
Before investing, depositors are advised to compare rates across banks and tenures, as offers vary widely depending on the bank’s liquidity position and business strategy.
