Lenders bank on special plans to raise retail deposits
lenders have intensified efforts to garner retail deposits through special plans that offer savers at least 25-30 basis points more than current commitments of comparable tenures, signalling policy interest rates will remain elevated for some time now.
SBI, Bank of Baroda, Indian Overseas Bank, Union Bank of India and Bank of Maharashtra have started deposit plans offering 7.25% to 7.30% on investments stretching from 399 to 444 days. These banks are offering an additional 50 basis points for senior citizens. The move to raise deposit rates comes within a fortnight of the Reserve Bank of India's (RBI's) interaction with banks.
Narrowing the Gap
The regulator had directed bank CEOs to narrow gap between deposit and credit growth. The latest RBI data showed bank credit rose 14% on-year as of June 28, while deposits rose 11%.
Experts said that banks have been offering these peak rates on shorter tenures on expectations that the rate cycle, which was earlier expected to turn toward the latter half of this calendar year, would eventually begin reversing as inflation stays durably within the central bank's legally mandated tramlines.
«Banks are offering higher rates for less than two years tenure. So when the interest rate cycle turns, banks would not want to be stuck with high-cost liabilities,» said Anil Gupta, senior vice president of the financial sector at ICRA Ratings.
However, in a recent media interaction, RBI governor Shaktikanta Das signalled that rates would remain alleviated for some time.
«The overall
