BoI raises fixed deposit rates by up to 1%

BoI raises fixed deposit rates by up to 1%

New Delhi: State-owned Bank of India (BoI) on Monday hiked fixed deposit rates by up to 1% on select maturities in line with other lenders.

Term deposits of 1-2 year maturity will now fetch customers 8.25% compared to 7.5% earlier, an increase of 75 basis points, BoI informed the Bombay Stock Exchange.

At the same time, interest rate on fixed deposit with 2-3 years maturity has been increased by 1% or 100 basis points to 8.25% against existing 7.25%, it said.

However, rate of interest in other brackets remained unchanged at earlier level.

It is to be noted that many banks including Punjab National Bank, Allahabad Bank, Syndicate Bank raised deposit rates recently to tide over tight liquidity situation.

With credit demand picking up and liquidity crunch yet to ease, ICICI Bank decided to raise interest rates on fixed deposits of various tenors by 0.25-0.50% effective today. At the same time it also raised lending rate by 50 basis points.

The announcements came soon after RBI governor D. Subbarao asked banks to hike deposit rates and lower lending rates, with a view to raise the level of national savings as well as to encourage investments needed for double-digit growth.

Even the country’s largest lender State Bank of India (SBI) plans to hike its deposit rate soon.

“Deposit rates could go up by 50 basis points or more," SBI chairman O. P. Bhatt had said.

Stating that there has been a slight uptick in demand for credit, Bhatt had said, “If credit growth picks up, more deposits can be attracted into the banking system by better pricing which is beginning to happen...In the current situation, they (deposit rates) can only go up."