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Federal Bank, a private sector lender, raised the interest rates on savings accounts. According to the bank's official website, the new rates are effective as of August 6, 2022. The repo rate was increased by the Reserve Bank on Friday by 50 basis points to 5.40 per cent, marking the third straight hike since May. Additionally, because Federal Bank's savings account interest rates are linked with repo rates, they have increased as well.

Federal Bank Savings Account Interest Rates

Federal Bank will now give an interest rate that is 2.40 below RBI's repo rate on savings account balances under 5 crore. The interest rate offered by the bank on savings bank deposits of 5 crore and above will be 2.40 below the repo rate set by the RBI for amounts up to and including 1 lakh and 1.15 per cent below the repo rate set by the RBI for the remaining amount over 1 lakh.

Federal Bank Savings Account Interest Rates
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Federal Bank Savings Account Interest Rates (federalbank.co.in)

Federal Bank has mentioned on its website that “As the interest rates are linked to Repo rates, the interest rates will change as and when the Repo Rate gets revised by RBI on a T+1 basis. The rates as mentioned above will be calculated on the daily End of the Day balances maintained in Savings Bank accounts (Resident/NRE/ONR) and the same will be credited to respective accounts on a quarterly basis."

The repo rate has been increased by 50 basis points from 4.9 per cent to 5.4 per cent by the Reserve Bank of India. The MPC kept its position that it was committed to keeping inflation within target for fostering economic growth. Considering the impact of repo rate hike, the broking firm KRChoksey has said in a note that “The banks have also merely raised their rates on the deposits, which is in the range of 15-35 bps depending on the term of the bucket. Thus, this reflects that it will benefit the banks from substantial spreads, which will help to improve the NIMs for the banks in Q2FY23E. We believe banks will continue to pass on the interest rate hikes on their loans, while deposit rate hikes will be slower in the near term. We may see some impact on the affordable housing loans due to rising interest rates as the sentiments of consumers of buying home will slow down. We see ICICI Bank, Axis Bank & Kotak bank as the highest beneficiaries of this rate hike considering their higher concentration of floating rates compared to other peers."

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