Fixed Deposit Rates: These days, where it is becoming difficult for banks to withdraw cheap deposits from customers, they are now being forced to offer handsome interest on fixed deposits by beating inflation.
Some government banks, led by Punjab & Sind Bank, are offering higher returns of up to 8-8.5% per annum. Due to paucity of funding, banks are offering strong deposit rates to their customers for tenures ranging from 200 to 800 days, beating inflation. This is possible because credit growth has been better this year than deposits.
Fixed Deposit pricing is positive pricing for customers despite the low interest rate of 7%. At the same time, despite the retail inflation rising up to 6.52% in January, the real rates remained positive. Due to inflation being more than 6% in 10 months of 2022, due to six consecutive rate hikes by the Reserve Bank, the repo rate has increased by 250 bps to 6.50%.
The impact of credit growth
Credit growth has seen a 16.5% increase within 15 days as on January 13, 2023. While deposit growth stood at 10.6%. Rates have also increased for other reasons, because the interest rate on one-year deposit of the post office remains at 6.6% and for two years at 6.8%. At the same time , the yield on 10-year government securities is only 7.35%.
Why the lack of funding?
In fact, banks have put the entire blame for the increase in the repo rate since May last year on their borrowers, but they are not able to do so with deposits. Due to this, the situation of lack of funding has arisen. Because of which they have to borrow from the market.
According to the new deposit pricing, any depositor of a public sector bank gets 7 to 7.25% interest for 200 days to 800 days.
These banks are giving the highest interest
- State Bank of India (SBI) is offering 7.10% interest to general citizens and 7.60% to senior citizens for 400 days.
- Punjab & Sind Bank is offering 8% interest to retail depositors and 8.50% interest to senior citizens in 221 days bucket.
- Central Bank is giving interest up to 7.85% to senior citizens and 7.35% to retail customers for 444 days.
- Union Bank of India is giving 7.30% interest to retail customers and 7.80% interest to senior citizens on deposits of 800 days.
