HDFC Bank latest lender to raise FD rates

Mumbai: HDFC Bank has increased its deposit rates by up to 20 basis points, and it is now offering 6.6% to 7.4% interest on one-year and 55-month deposits, respectively. Previously, the best rate offered by the bank was 7.25% for a tenure of 18 to less than 21 months. The bank was offering 6.60% interest on one-year deposits and 7.00% on deposits over three years before the hike.
The bank has increased fixed deposit (FD) rates by 20 basis points to 7.35% for 35 month deposits.An additional 20 basis point increase has been applied to 55-month deposits. Senior citizens will receive an extra 50 basis points for all time periods.
HDFC Bank is the latest among large banks to hike deposit rates. Last week State Bank of India announced a new 444-day scheme named "Amrit Vrishti" where it offered 7.25% with an additional 50 basis points for senior citizens.
Before this Bank of Baroda increased deposit rates through a special monsoon scheme, offering customers 7.25% on 399-day deposits and 7.15% on 333-day deposits.
Interestingly, HDFC Bank’s deposit rate hike comes even as the bank ran down Rs 16,000 crore of deposits raised by the erstwhile deposits in order to bring down costs.
Deposit rates are inching up even as economists are forecasting that the Reserve Bank of India’s next interest rate move would be a rate cut. The reason for the rate hike is the slowdown in bank deposits which are growing at sluggish single digits much slower than loan growth.
With the largest private bank and the largest bank in the country hiking deposit rates other banks will be forced to follow suit. According to Puneet Sharma, chief financial officer Axis Bank, the liquidity situation in banks might improve after the budget.
“We do hope now that the budget is behind us, government spending should also come back into the system. Having said all that, we are also in a competitive environment. We do believe that we will have to stay competitive as far as rates are concerned,” said Sharma.