HDFC Bank Raises Fixed Deposit Rates By 20 Basis Points

India's largest private lender, HDFC Bank Ltd., increased its interest rates for fixed deposits under Rs 2 crore by 20 basis points with effect from June 10, 2024.

The revised rates are in the range of 3-7.25% for general customers, depending on the tenure of the deposit, which ranges from 7 days to 10 years, according to the bank's website.

On fixed deposits maturing between 18 and 21 months, the interest rate stood at 7.25%.

For senior citizens, the bank revised interest rates marginally higher in a range of 3.5-7.75%. Senior citizens received the highest rates on deposits maturing between 18 months and less than 21 months, at 7.75%.

The move by HDFC Bank comes after the State Bank of India increased its interest rates on retail deposits up to Rs 2 crore for certain tenures in May. The public sector bank raised rates on deposits maturing within 46 days to less than a year by 75 basis points.

On Friday, the Reserve Bank of India maintained its policy repo rate unchanged at 6.5% for the eighth consecutive time. Further, the monetary policy committee decided to remain focused on the withdrawal of accommodation to ensure the anchoring of inflation expectations and fuller policy transmission.

Apart from policy decisions, the central bank raised the limit on bulk deposits for banks and small finance banks to Rs 3 crore from Rs 2 crore.

Industry experts expect this to boost deposits, especially at a time when banks are grappling with a high credit-deposit ratio of around 81.51% in the fourth quarter.

"The persisting gap between credit and deposit growth rates warrants a rethink by the boards of banks to re-strategise their business plans. A prudent balance between assets and liabilities has to be maintained," RBI governor Shaktikanta Das said in his policy address on Friday. 

In the credit market, monetary transmission remains ongoing, he added.

RBI data shows that an increase of 250 bps in the repo rate since May 2022 resulted in the weighted average lending rate on fresh loans rising by 204 bps and that on outstanding loans by 111 bps. In the same period, the weighted average domestic term deposit rates on fresh deposits and outstanding deposits rose by 245 bps and 188 bps, respectively.