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As the pursuit of banks to collect cheap deposits from customers is not bearing fruit, they are forced to now offer anti-inflation real interest rates on fixed deposits, and public banks run by Punjab & Sind Bank are at the top of the table offering 8-8.50% per annual deposit rate.
Banks are forced to offer deposit rates that beat inflation for terms ranging from 200 to 800 days, as credit growth has far exceeded deposit mobilization throughout this fiscal year, leading to a funding crisis.
Read also: Sharp rise in interest rates for postal savings banks
Even at the low of 7%, fixed deposit pricing is positive for clients because even after a surprise surge in retail inflation in January to 6.52%, real rates are in the green.
Inflation has been above 6% for 10 months in 2022, forcing the Reserve Bank to raise rates by 250 basis points to 6.50% in six consecutive hikes from May 2022.
Over the fortnight of January 13, 2023, credit growth increased by 16.5% at an annualized rate against 10.6% growth in deposits. In fact, for most of the year, deposit growth has been mid single digits and the recent spike is due to an increase in deposit rates since December.
Rates are also better even from other angles, as one-year postal deposits yield 6.6% and two-year 6.8%, while 10-year government securities yield only 7.35% .
The offer of high rates also comes as banks have almost entirely passed on the 250 basis point rise in the RBI rate since May last year to their borrowers, they have not done so for deposits, which results in a financing gap and forces them to borrow from the market.
According to the new pricing of deposits, on average any depositor of a public sector bank is insured from 7 to 7.25% for time deposits for a term ranging from 200 days to 800 days.
The country’s largest lender, State Bank of India, which has the largest retail franchise with around 20,000 branches, is offering 7.10% to the general public and a higher 7.60% to the elderly on a monthly basis. annualized for fixed deposits in the 400-day bucket.
Punjab & Sind Bank offers the highest rate at 8% to retail depositors and 8.50% to senior citizens for the 221 day tranche.
The Central Bank of India is pricing the second best rate at 7.85% for the elderly for 444 days and 7.35% for individuals, while the Union Bank of India is pricing its deposits for 800 days at 7 .30% and 7.80% for individuals and the elderly.
The Punjab National Bank offers individuals and senior citizens, respectively, 7.25% and 7.75% on its 666-day tranche, Bank of Baroda’s new pricing is 7.05% and 7.755% for 399 days; Bank of India offers the same rate as Bank of Baroda for 444 days, while Bank of Maharashtra’s new rate is 7% and 7.50% for 200 days.
For 400 days, Canara Bank offers 7.15% and 7.65%; Indian Bank pays 7% and 7.50% for its 555-day deposits; UCO Bank is at 7.15% and 7.25% for 666 days; and Indian Overseas Bank offers 7% and 7.50% for 444 days.
On the other hand, the largest private sector lender HDFC Bank only offers 7% to the general public and 7.50% to senior depositors for five years, while its immediate counterpart ICICI Bank gives 7% for more than 15 months. to individuals and 7.5% to seniors for more than 15 months.