SBI increases rates on bulk deposits by up to 125 bps – All you need to know

State Bank of India (SBI), the country’s largest lender, on Tuesday raised interest rates on deposits of over Rs 1 crore by 40-125 basis points (bps). This is the second time the bank has raised rates on bulk deposits in as many months. Rates on one-year deposits were raised by 100 bps to 6.25%, while those on deposits with maturities of two years or more were hiked by 75 bps to 6%. SBI is not the only large bank to have raised bulk-deposit rates in recent months. ICICI Bank’s one-year bulk-deposit rate (for amounts between Rs 1 crore and Rs 100 crore) has increased to 6.85% from 6.5% after multiple rounds of revision since December 19, 2017.

Effective January 1, Punjab National Bank (PNB) and Bank of Baroda (BoB) raised rates on deposits of over Rs 1 crore to 5.75%, up from 5% earlier. While PNB left the rate on one-year retail deposits at 6.6%, BoB slashed the corresponding rate by 15 bps to 6.45%. Earlier on December 20, Axis Bank had raised rates on deposits of over Rs 1 crore with maturities of four months or more by 15-25 bps. All bulk deposits at the bank maturing between one year and 18 months now yield 6.75% against 6.6% earlier. Those with longer maturities earn 6.25%.

On Tuesday, ratings agency Icra said that with a situation of liquidity deficit emerging in the system, banks may be pushed to mobilise higher deposits, leading to an upward pressure on deposit rates. Karthik Srinivasan, group head – financial sector ratings at Icra, said, “The need for higher deposit mobilisation and trend of increasing deposit rates are already visible in the bulk deposit segment, with the surge in volume of certificate of deposits (CDs) outstanding as well as increase in minimum CD rates during last quarter. Banks with higher proportion of bulk deposits have already undertaken a hike in deposit rates during January 2018, although it remains limited to a few banks.”

State Bank of India