Federal Bank and Dena Bank raised their term deposit rates by 25-50 basis points (bps) on certain buckets to make them more attractive at a time when deposit growth has been slowing.
Kerala-based Federal Bank raised its term deposit rates for 1-3 years to 9% from 8.75%. The rate of interest for deposits for 91 days to 119 days has been increased to 7.5% from 7%. ?It is just a tactical move that may be temporary and we might cut the rates in March once the policy rates are down,? Abraham Chacko, executive director of Federal Bank, said. The bank has also raised its interest rates by 25 bps on NRI deposit for 1-3 years to 9%.
Meanwhile, Dena Bank raised its interest on fixed deposits of 1-3 years to 9.10% from 8.75%. ?We were offering lower rates than some of our peers; so, to match that, we have slightly raised the deposit rates in this particular bucket,? said Ashok Dutt, Dena Bank ED.
The banking sector’s deposit growth has hit a nine-year low in the fortnight ended November 30 where it grew 12.76%, Reserve Bank of India (RBI) data showed. The last time deposit growth dipped below 13% was in December 2003. The RBI has projected a deposit growth of 15% for banks for the current financial year. Deposit growth has weakened over the last two years for banks as rising inflation lured investors to other products, primarily gold and real estate.
Federal Bank?s year-on-year deposit grew 4.77% to R49,518.07 crore, while advances grew 8% to R36,299.18 crore, in the quarter ended July-September.
