Mumbai: State Bank of India plans to raise deposit rates by 25-50 basis points from 1 June, a move that analysts said would help attract funds to meet aggressive growth targets.
“Two-to-three-year term deposit rate will be raised to 8.75% from 8.5% and five-to-ten-year deposits would fetch 9% from 8.5%,” the state-run bank said in a statement.
“The bank has set growth targets in excess of the industry and is in need of resources,” Manish Agarwalla, banking analyst at MF Global said.
SBI, which controls 23% of India’s banking business along with its associates, has projected a 25% growth in loans in the year to March 2009, compared with a 20% forecast for the banking sector by the central bank.
Agarwalla said the higher deposit rates could put pressure on State Bank’s operating profit margin in the short term.
State Bank shares ended 2.3% lower at Rs1,537.70 in a Mumbai market that lost 1.8%.
The shares have fallen 31.3% so far in 2008, compared with a 30.5% slide in the BSE Bank index and a 19.4% fall in the benchmark index.