With a few banks and non-banking finance companies hiking interest rates on fixed deposits for certain tenors, experts believe it is too early to deem it as the start of an increasing interest rate cycle.

Madan Sabnavis, chief economist, CARE Ratings, noted that the increase in rates is not being done universally and is just for certain maturities.

Starting December, lenders including HDFC Bank and Ujjivan SFB have announced an increase in interest rates for select tenors. HDFC bank had on December 1 announced an up to 10-basis point hike in interest rate on fixed deposits of various tenors. “Attractive fixed deposit interest rates for tenures three years one day to five years for amounts less than ₹2 crore with effect from December 1,” the bank said on its website. Similarly, Bajaj Finance had announced an increase in FD rates by 0.30 per cent for tenors between 24 and 60 months on deposits of up to ₹5 crore.

Surplus deposits

“ In general, banks have surplus deposits. So, these hikes should not be interpreted as a starting point of an increasing interest rate cycle. But it is good for small savers,” Sabnavis said.

Kuntal Sur, Partner, Financial Risk and Regulation, PwC India, said, “Interest rates have plateaued out despite the government and the RBI’s efforts to keep them as investor-friendly as possible. The yields in nearer term (two years) have hardened more than that of the 10-year bond and is probably reflected in the increase in deposit rates by certain banks. The higher interest rate could also be partly related to asset liability mismatch.”

The move is positive for small savers, especially senior citizens, many of whom depend on interest rates from fixed deposits as a source of income, said Harshad Chetanwala, co-founder, MyWealthGrow.com.