State Bank of India (SBI), a leading public sector bank in India, has recently increased interest rates for term deposits by a maximum of 10 basis points. The lender now offers a 7.3% return to senior citizens and a 6.8% return to others for deposits that have a tenure of over one year.
The public sector lender increased rates on all fixed deposits that have a maturity period over 1 year. The increased interest rates are effective from November 28. Most of State Bank of India’s fixed deposits have maturity periods over 1 year.
For fixed deposits with maturity periods of two years and three years, the interest rate has been raised to 6.80% from the previous 6.75%. For senior citizens, the new interest rate for fixed deposits with the same maturity period has been raised to 7.30% from 7.25%. The interest rate for SBI pensioners and SBI staff will be 1% over the current applicable interest rate.
Considering the fact that the benchmark rate for loans is primarily determined by the cost of funds, it is likely that the bank will also increase its MCLR or marginal cost of lending rate during the next few months.
SBI has increased its interest rates for fixed deposits at a time when there is a deficit of almost Rs.1 lakh crore in the money market. The same is being reflected in the bank’s short-term borrowings.
Earlier in November, HDFC Bank increased its fixed deposit interest rates by a maximum of 0.5%, while ICICI Bank raised its fixed deposit interest rates by a maximum of 0.25% on certain maturities.
Sources: The Times of India, India Today