A clutch of banks has increased their interest rates on fixed deposits, shortly after the Reserve Bank of India (RBI) hiked the key policy rate on May 4 in an unscheduled announcement.
These lenders include Bandhan Bank, Kotak Mahindra Bank, Jana Small Finance Bank, Bank of Baroda, and ICICI Bank. These lenders have announced deposit rate hikes across multiple tenor baskets for retail customers.
Kotak Mahindra Bank, in a statement, said it has increased fixed deposit interest rates by 30 basis points and 35 basis points for the tenure of 390 days and 23 months, respectively. Similarly, Bandhan Bank, too, raised the interest rate on deposits by 50 basis points for one year to 18 months and above 18 months to less than two years tenure deposits.
This follows banks hiking lending rates. A host of banks have increased their lending rates already. These include Bank of Baroda and ICICI Bank. ICICI Bank has raised the external benchmark lending rate by 40 basis points to 8.10 percent.
Analysts predict more banks may soon announce increases in lending and deposit rates.
On May 4, the central bank increased the repo rate by 40 basis points to 4.4 percent for the first time in almost two years since the start of the pandemic in 2020. While this move by the RBI is bound to affect the individuals with loans, it came as good news for those investing in fixed deposits, according to analysts."Since around 40 percent of banking system's loan is linked to REPO, all of those will automatically become costlier with the increase in REPO by the same amount," added Prakash Agarwal, a banking analyst and president of financial services at India Ratings and Research.