The Hindu Business Line : Higher interest rates restore popularity of bank deposits

Interest rates on FDs for one year and above, but less than three years are now around 9.5–10 per cent, which was around seven per cent six months ago. Most banks have increased their deposit and lending rates following the recent hike in rates by RBI. With equity markets becoming highly volatile, investors are looking at stable options.

IndusInd Bank has recently launched a scheme offering as high as 10 per cent returns for a 400-day deposit. Most public sector banks are offering 9.5 per cent on one-year deposits.

According to Mr Saumitra Sen, head of branch banking, IndusInd Bank, “Fixed deposits are a much safer asset class for retail investors, for a one year horizon, given that the Sensex is down.” Interestingly, existing depositors are also opting for ‘premature renewal’ of their existing deposits at higher rates, said bankers.

Corporation Bank has launched a 400-day deposit offering 9.6 per cent from July 8 , for a limited period. The minimum deposit amount is Rs 25,000 and maximum is Rs 15 lakh. In less than 10 days, the bank has garnered around Rs 500 crore, said a senior official from the bank.

“ Given the high inflation, the rates may not be very good, but in the current circumstances, they are better than equity or mutual funds. We may extend the time period for the scheme, because I don’t envisage rates to come down in the near future,” the official said.

Union Bank of India, another PSU bank raised Rs 6,000 crore from the 9 per cent 400-day deposit scheme. The scheme which started from April 10 till the first week of July, has been discontinued now, because as per the revised rates the bank is offering 9.5 per cent for a deposit of over one year.

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