New Delhi: State Bank of India, or SBI, the country’s largest bank, has raised interest rates on bank fixed deposits, or FDs, in a move that might spur other banks to also increase their rates on deposits. The revised SBI rates on FDs of less than 1 crore are effective from today. SBI has increased interest rate on FDs with maturity of more than one year. The bank, for example, is offering an interest rate of 6.70% on FDs with maturity between one year and less than two years, up from 6.65% it was offering earlier.

For FDs maturing between 2 years and 3 years, SBI is offering 6.75% as compared to 6.65% earlier. The rate for deposits between 3 and 5 years has been revised to 6.80% from 6.70%. FDs with maturity between 5 and 10 years will fetch an interest rate of 6.85%, as compared to 6.75% earlier.

The interest rate on SBI’s income-tax saving deposits, which have a minimum lock-in period of five years, also goes up. The amount invested in a tax-saving fixed deposit is eligible for tax exemption under Section 80C. SBI’s tax-saving FDs will now offer 6.85% to the general public, as compared to 6.75% earlier.

SBI offers senior citizens 0.50% more than it does the general public. The interest rate for senior citizens for tenures over one year has also been revised.

For SBI FDs with maturity between 1 and 2 years, senior citizens will receive an interest rate of 7.20% as compared to 7.15% earlier. Deposits between 2 and 3 years will fetch senior citizens 7.25%, higher than 7.15% offered earlier.

Deposits between 3 and 5 years will fetch senior citizens 7.30% as compared to 7.20% earlier. And deposits over 5 years will fetch 7.35%, as compared to 7.25%.

SBI’s latest interest rate on deposits below 1 crore

Banks have been increasing interest rates on deposits in line with a general increase in interest rates in the financial system. The Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) last month increased the policy repo rate by 25 basis points to 6.25%, the first such hike in over four years, as inflation concerns mounted. The repo rate is the rate at which the central bank lends to commercial banks.

The RBI is expected to hike the policy rate later this week. Of the 15 economists surveyed by Mint, 12 expect the RBI to raise its repo rate to 6.5%.

Besides that, credit growth is also picking up, leading banks to offer higher rates to attract deposits. Credit to various sectors, including agriculture, has risen 12.3% year-on-year, data available as of July show, according to Bloomberg.

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