State Bank of India (SBI) and private lender ICICI Bank have made sharp increases in their interest rates on some domestic term deposits, which will come into effect from Tuesday. While SBI has hiked deposits rates on deposits of one-year tenure by 65 basis points (bps), ICICI Bank has increased rates by 50 bps on deposits of one-year maturity.
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SBI has increased the interest rate on retail term deposits with longer maturities in the range of 15-65 basis points (bps). The bank has increased interest rate on retail deposits with one-year maturity to 6.75%. The revised rates in other buckets are in the range of 5.75-6.75%. Prior to this, the lender had revised the rates on retail deposits in October. The bank has also raised interest rates by 50 bps to 6.50% on bulk deposits maturing in a year to less than two years.
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SBI, from May to November, had raised deposit rates by 80 bps in the one-two year bracket. With this increase, the bank has increased interest rates on deposits by a total of 145 bps. The Reserve Bank of India (RBI) has so far raised the repo rate by 225 bps during the same time, although it has slowed down on the quantum of rate increases.
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Despite having Rs 3.5 trillion in excess liquidity, the bank will continue to garner more deposits, SBI chairman Dinesh Khara had said earlier. The bank is planning to deploy the surplus liquidity in the current financial year to support the credit growth, he had said.
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ICICI Bank also revised interest rates on retail term deposits to 6.60% on deposits maturing in a year to 389 days. The bank has kept the interest rates on bulk deposits unchanged. The bank has seen good momentum in the retail deposits, although the pace of increase in the retail rates has been much lower compared to the wholesale deposit market, Anindya Banerjee, CFO, ICICI Bank, had said in an analyst call.
Although the credit growth has outpaced the deposit growth by a large margin, the difference in the growth rate should be seen in a proper perspective, RBI governor Shaktikanta Das had said in a post-policy conference.
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“The credit growth is on a low base. The deposit growth is on a high base. That is why they (credit and deposit growth rates) look to be so divergent. During the whole period of the pandemic and also last year, there was hardly any credit growth. But deposit growth had picked up during the two years of the pandemic. So whatever is happening on the deposit side has to be seen in the context of the base effect,” Das said.
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Non-food credit grew by 17.6% in the fortnight ended November 18, as compared to deposit growth of 9.6% during the period. Credit growth is expected to continue to outpace deposit growth in the
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remaining part of FY23, according to India Ratings. However, the gap between credit and deposits is likely to reduce in FY24, driven by a moderation in credit demand, the agency said.
