RBI's rate hike cycle that began in the initial days of FY23 did little to no impact on the banks' credit demand as growth is at a comfortable double-digit rate of scheduled commercial banks. Credit demand is unlikely to budge, and that has likely led the lenders in the race of acquiring maximum deposits. Banks' credit growth continues to outpace deposits, and hence it is expected that the traditional fixed deposit schemes may continue to see more hikes ahead. At present, small finance banks have been surpassing both public sector and private banks when it comes to offering attractive FD rates.
Cyril Charly, Research analyst at Geojit Financial Services on Thursday said, "With liquidity becoming tighter and credit demand remaining strong, lending institutions are in the race to acquire the maximum deposits. Small Finance Banks are offering fixed deposit rates that are 75-100 basis points higher than those offered by Public Sector Banks (PSBs) and private banks."
Such has helped small finance banks grow their deposits book t three times the pace of commercial banks, Charly added, "albeit partly due to the low base."
From May 2022 to February 2023 policy, RBI hiked the repo rate by 250 bps, taking it to 6.5%. It was in the April 2023 policy that RBI took a tactical pause in the rate hike, however, maintained its policy stance. In these periods, both lending and deposit interest rates at banks have gone up.
In the minutes of the meeting of MPC for the April 2023 policy, RBI hinted towards the possibility of more rate hikes ahead. Governor Shaktikanta Das said, it is tactical and not a pivot or a change in policy direction. He believes the fight against inflation is far from over.
If rate hikes are stored in the upcoming policies then both banks' lending and deposit rates will be pushed up too.
Another reason for more hikes in FD rates would be the fact that credit growth has outpaced deposits.
As per RBI's data, banks' credit growth is at 15.7% in FY23, while aggregate deposits growth stood at 10.2%.
Geojit's analyst said, "Despite the RBI's temporary pause on rate hikes, it is expected that term deposit rates will undergo further upward revisions, as credit demand is predicted to continue outpacing deposit growth."
Check latest FD rates here:
SFBs latest FD rates:
Let's look at the FD rates of listed SFBs such as AU Small Finance Bank, Ujjivan Small Finance Bank, Equitas Small Finance Bank, and Suryoday Small Finance Bank.
Equitas SFB is the latest to hike interest rates on FDs with effect from April 11, 2023. The bank is offering 3.5% to 8.50% to the general category. To senior citizens, the bank gives an extra 0.5% and hence the highest rate for them is up to 9%.
Currently, AU SFB offers interest rates in the range of 3.75% to 8% to a general category on FDs below ₹2 crore. For senior citizens, the rates vary from a minimum of 4.25% to a maximum of 8.50%.
Meanwhile, Ujjivan SFB offers FD rates from 3.75% to 8.25% for the general category. To senior citizens, the bank offers 0.50% additional on the normal rates and hence the highest interest rate comes to around 8.75%.
Last month, Suryoday SFB revised its FD rates by a whopping 5 to 200 basis points. At present, this SFB is giving from 4% to 8.51% interest rate to the general category, while the elderlies can earn from 4.50% to 8.76%.
Public sector banks (PSBs) FD rates:
To the general public, SBI currently offers from 3% to 7%. While elderlies here earn in the range of 3.5% to 7.50%. Under its special FD scheme for 400 days (Amrit Kalash), SBI gives 7.10% to general and 7.60% to senior citizens.
Another leading PSB, Punjab National Bank is giving 3.50% to 7.25% rates on FDs below ₹2 crore to the general category. The senior citizens here get from 4% to 7.75%.
Somewhat similarly, Bank of Baroda offers 3% to 6.75% in the normal category, while senior citizens get from 3.5% to 7.5%. Under its Baroda Tiranga Plus deposit scheme having a tenure of 399 days, the bank gives as high as 7.05% to the general category and 7.55% to senior citizens.
Private banks' FD rates:
Largest private sector bank, HDFC Bank is offering 3% to 7.10% to its general customers on FDs below ₹2 crore. The interest rate is higher for senior citizens as they earn in the range of 3.5% to 7.75%.
Noteworthily, another leading private lender, ICICI Bank offers almost similar FD rates as HDFC Bank. ICICI Bank gives 3% to 7.10% to normal customers, and 3.5% to 7.60% to senior citizens.
Unlike the other two private lenders, Kotak Mahindra Bank offers FD rates from 2.75% to 7.20% to general customers, and from 3.25% to 7.70% to senior citizens.
Generally, either be SFBs, PSBs or private banks, the minimum tenure on FDs is 7 days to maximum 10 years. The FD interest rates and tenures vary from bank to bank.
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