Thursday, 21 June, 2018

SBI increases fixed deposit rates, hike in lending rates may follow

State Bank of India steeply hikes deposit rates for various tenure SBI hikes lending rates a day after increasing FD rates
Lindsey Cook | 02 March, 2018, 07:22

However, the largest lender on Thursday hiked its lending rate by 0.20 percentage point (20 basis points) to 8.15 per cent, with immediate effect, setting the tone for increase in EMIs. As banks lend to retail customers on one-year MCLR, which is considered as the key lending rate, the interest outgo on all retail loans, including home loans, auto loans, education loans, certain personal loans and loans against properties is expected to be higher. Bankers opine that the hike in the one-year MCLR was due to the increase in deposit rates, shortage of liquidity in the system, and the overall cost of funds.

Following suit, PNB and ICICI Bank also hiked the MCLR rates for loan borrowers.

For above Rs 10 crore bulk deposits maturing between one year and less than two years, the rates have been raised by 0.50 percent to 6.75 percent. So when we were comparing our deposit rate with other banks' rates, we noted the difference has become quite wide. "Now when deposit rates rise, MCLR is bound to go up", said Rajiv Anand, executive director of retail banking at Axis Bank Ltd.

OvernightMCLR and six-month MCLR have been increased by 10 bps each to 7.80% and 8%, respectively.

When it comes to the bulk term-deposit rates, this is the third pricing revision in the past four months by the nation's largest lender. Some lenders such as HDFC Bank will review rates next week.

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The new benchmark rate will be effective from March 1, 2018, the bank said through a notification. While holding rates steady, the central bank has also maintained its neutral stance.

PNB also increased its retail and bulk term deposits by up to 45 basis points today.

Typically, a deposit rate hike is followed by a lending rate hike.

Earlier, the bank had raised interest rates on fixed deposits across all maturities.

Senior citizens with deposits of 2 years to 10 years will now get 7% as against 6.50% earlier while for deposits maturing below one year they will earn 6.9% as against 6.75% before.

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