SBI raises rates by 10-25 bps on some maturities of deposits

State Bank of India (SBI) on Wednesday raised interest rates on retail and bulk fixed deposits of some maturities by between 10 bps and 25 bps.

The rate on deposits of under Rs 1 crore maturing between two years and three years was raised by 10 bps to 6.6% and that on deposits maturing between three years and five years was hiked by 20 bps to 6.7%. Retail deposits of longer maturities will now yield 6.75%, 25 bps more than earlier. The rate on one-year retail deposits was left unchanged at 6.4%.

SBI’s closest rivals HDFC Bank and ICICI Bank pay 6.75% and 6.6%, respectively, for such deposits. Deposits of more than Rs 1 crore maturing between one year and two years will now earn 7%, up from 6.75% earlier. Anshula Kant, deputy managing director and chief financial officer of SBI, told FE that the bank had been seeing huge outflows because of relatively lower deposit rates. Loan rates, however, are unlikely to rise further from their current levels, Kant said. “We are seeing a pick-up in credit growth and that will aid expansion in margins from here on,” she observed.

SBI had raised retail deposits last month as well, followed by a hike in lending rates. Interest rates in the system have already begun to harden and analysts say the rate cycle has turned.

In a recent note, brokerage Kotak Institutional Equities (KIE) wrote that interest rates on new loans have risen more than the average rate for banks’ overall portfolio. “While we have seen fresh lending rate move up marginally, average lending rates are still around 80 bps above the fresh lending rates. This gap needs to narrow down as the portfolio is still witnessing pressure on the downside while the cost of funds has already started to increase,” KIE said, adding that higher borrowing costs for NBFCs may offer some relief to banks in competitive terms. Slippages will be another key variable to impact calculations around net interest margins (NIMs), KIE said.

State Bank of India