Now, IDBI Bank too hikes deposit rates to fund strong loan demand

At a time when banks are looking to aggressively increase mobilisation of deposits to fund demand for loans, IDBI Bank has increased interest rates on term deposits. The lender is offering a peak rate of 6.7 per cent to senior citizens for a select period under a new scheme.

“The bank has also introduced a limited period special 500 days deposit under the Amrit Mahotsav FD (fixed deposit) scheme, offering a peak rate of 6.7 per cent. Amrit Mahotsav is a limited period offer available up to September 30, 2022,” IDBI Bank said. The special offer is effective from Monday.

Under the Amrit Mahotsav offer, general customers would receive an interest rate of 6.1 per cent for callable deposits and 6.2 per cent for non-callable deposits worth more than Rs 15 lakh. Senior citizens would receive 6.6 per cent for callable deposits and 6.7 per cent for non-callable deposits of more than Rs 15 lakh.

Around 25 per cent of IDBI Bank’s retail fixed deposits are from senior citizens, industry sources said.

IDBI Bank has also raised deposit rates for other buckets.

Effective Monday, the lender is offering a peak rate of 5.8 per cent for retail term deposits under Rs 2 crore. This is for those with maturity brackets of five years, more than five years-seven years and more than seven years-10 years, the lender’s website showed.

The highest rate for senior citizens is 6.55 per cent for tenors ranging from 5 years to more than 5 years and up to 10 years.

Effective August 20, Unity Small Finance Bank also increased rates on bulk deposits. For non-callable bulk deposits worth more than Rs 2 crore but less than Rs 5 crore, the bank is offering a peak rate of 7.1 per cent. This is for tenors of more than two years-three years and more than three years-five years.

Last week, State Bank of India (SBI) and Bank of Baroda also announced special deposit schemes to commemorate 75 years of Independence. SBI launched a 75-day scheme, offering 6.1 per cent for fixed deposits, with senior citizens being offered 0.5 per cent more.

Since the Reserve Bank of India’s (RBI’s) decision to hike the repo rate by 50-basis points (bps) on August 5, a slew of lenders have raised fixed deposit rates under various maturities. They include Indian Overseas Bank, Indian Bank, Kotak Mahindra Bank and Ujjivan Small Finance Bank

As on July 29, growth in bank credit was 14.5 per cent year-on-year (YoY). For deposits, it stood at 9.1 per cent, latest RBI data showed.

Higher loan rates

Mortgage financier LIC Housing Finance, hiked its home loan rates by 50-basis points, with effect from August 22. The new rates on home loans would now start from 8 per cent as opposed to 7.5 per cent earlier.

“The hike in repo rate has caused some minimum fluctuation in the EMIs or the tenure on home loans but demand for housing will remain robust. The interest rate hike of LIC HF is in line with the market scenario,” said Y Viswanatha Gowd, managing director (MD) & chief executive officer (CEO), LIC Housing Finance.

Bajaj Housing Finance also increased its home loan rates by 50 bps on Monday. The rates start from 7.7 per cent. “While the interest rates have increased by 50 bps, the company’s home loan offer remains one of the most competitive in the market,” it said.

Previously, HDFC increased home loan rates by 25 bps. The revised rates for new borrowers would range between 8.05 per cent and 8.55 per cent, depending on the loan amount.

IndusInd Bank also increased its marginal cost of funds-based lending rate (MCLR) by 10-20 bps across tenors, effective August 22.