Mumbai, Jan. 7
STATE Bank of India announced on Saturday a hike in interest rates on domestic term deposits by 0.25-0.50 percentage points on varying maturity from January 9.
SBI is the latest to hike the deposit rates. Bank of Baroda, Bank of India, Union Bank of India and HDFC Bank have hiked the rates since November. The increase in the rates ranged from 25 to 50 basis points. Many of them are also entering the capital market to mobilise funds to meet the rising credit demand.
Most of the banks have reported a higher credit growth as compared to the deposit growth for the half-year ended September 30, 2005. For the quarter ended September 30, 2005, Bank of Baroda had seen its deposits inching up by 9.59 per cent, while total advances increased by 30.87 per cent. Similarly, HDFC Bank saw deposits increase by 35.8 per cent, while total advances increased by 44.4 per cent. Bank of India's global deposits grew by 13.51 per cent, while total advances increased by 20.6 per cent for the same period. Union Bank of India too saw its deposits rise by 23 per cent, while advances increased by 33.46 per cent. The same is case with SBI, which saw advances rise by 31.16 per cent and deposits inch up by 12.55 per cent for the period ended September 30, 2005. RBI has been advising banks to step up their deposit mobilisation schemes.
In October, RBI raised the reverse repo and repo rates by 0.25 per cent in its monetary policy. SBI has raised the rates on short-term deposits of 15-45 days by 50 basis points (bps) to 4.5 per cent, on deposits of 46-179 days by 25 bps to 4.75 per cent and on deposits of 180 days to less than one year by 50 bps to 5.5 per cent.
On deposits of one year to less than three years, the rates have been increased by 50 bps to 6 per cent a year. On deposits of three years to less than five years, the rates have been increased to 6.25 per cent.
For deposits of five years and above, the rate has been increased by 25 bps to 6.5 per cent. Senior citizens will get a higher interest of 50 bps above the card rate for deposits of over one year and up to five years.
The bank would also accept term deposits of seven to 14 days for amounts of Rs 1 crore at 3 per cent interest rate. Bankers also say that retail loans such as home loans, vehicle loans and education loans too may see a gradual rise this year.