RBI Repo Rate: After Hike In Lending Rates, Banks Start Hiking Deposit Rates on FDs, SBs

Days after the Reserve Bank of India (RBI) announced a 40 basis points (bps) hike in repo rate from 4 per cent to 4.4 per cent, some banks have started increasing the deposit rates, thereby giving depositors something to cheer about. 

Repo rate is the rate at which the RBI lends money to all commercial banks. An increase in repo rate translates into a hike in the lending as well as deposit rates. For the uninitiated, one bps equals 0.01 percentage point.

Soon after the hike in repo rate, several banks and lending institutions, such as ICICI Bank, Bank of Baroda, and Housing Development Finance Corporation (HDFC), among others, had increased their lending rates. Consequently, that had led to rise in lending rates for both existing as well as new borrowers.

To know how the hike in repo rate will translate into costlier loans, click here

Increase In FD Rates For Retail Customers

After the hike in lending rates, some banks have now started increasing the fixed deposit (FD) rates for retail customers on deposits below Rs 2 crore, and across tenures.

Kotak Mahindra Bank, for instance has increased the deposit rate on its popular 390-day deposit scheme by 30 bps to 5.5 per cent, and on its 23-month deposit by 35 bps to 5.6 per cent. Senior citizens are being offered an additional deposit of 50 bps on the deposit rates.

Bandhan Bank has increased the deposit rate on fixed deposits of 1-2 year tenure on amounts below Rs 2 crore by 50 bps. On FDs of tenures 12-18 months, and 18-24 months, the deposit rate has been increased from 5.25 per cent to 5.75 per cent. For senior citizens, the deposit rate is 6.50 per cent per annum.

Small finance bank, such as Jana Small Finance Bank have also revised their interest rates on fixed deposits by 25 bps on deposits below Rs 2 crore. The rate of return is 6.50 per cent on tenure from one year to less than two years. For senior citizens, the rate of return is 7.30 per cent per annum.

For 5-year FD, the rate of return is 6.75 per cent. Senior citizens will get a return of 7.55 per cent on their deposits.

Institutions and Ultra-High HNIs

The country’s largest lender, the State Bank of India has hiked the interest rate on fixed deposits above Rs 2 crore.

For FDs with maturity of 2-3 years, the rate of return has been increased by 65 basis points to 4.25 per cent. Deposits of 3-5 years and 5-10 years will earn returns at 4.5 per cent per annum. 

SBI has also increased the deposit rate on short-term FDs. Those with a maturity of 46-149 days will fetch 50 bps higher returns and a rate of return of 3.5 per cent per annum. For deposits of more than one year and less than 2 years, the interest has been hiked by 40 basis points and will fetch a return of 4 per cent per annum.

Union Bank of India, has increased the savings deposit rates on deposits above Rs 100 crore to Rs 500 crore by 20 basis points from 2.90 per cent to 3.10 per cent. For deposits between Rs 500 crore and Rs 1,000 crore, the rate has been hiked by 50 basis points to 3.4 per cent from 2.90 per cent, while for deposits above Rs 1,000 crore, the rate has been increased by 65 basis points to 3.55 per cent from 2.9 per cent, Livemint said in a report.