Bandhan Bank raises fixed deposit rates by up to 0.5 percent. Check what you'll get

Among major banks, State Bank of India (SBI), HDFC Bank and Kotak Mahindra Bank have raised their FD interest rates. Small finance banks (SFBs) like AU, Jana and Equitas hiked interest rates, too.

Kolkata-based Bandhan Bank has joined the club of other banks in hiking the deposit rates to attract customers. The bank, on 6 February, said it has increased the interest rates on fixed deposits by up to 50 bps across different maturities effective February 6.

With this, the bank will offer 8.5 percent interest p.a. for senior citizens and 8 percent for others for deposits with a tenure of 600 days. Similarly, for one-year deposits the revised rate now stands at 7 per cent.

Senior citizens will get additional 0.5 per cent for this maturity.

The revised FD rates are applicable for retail deposits of up to Rs 2 crores and are effective from February 6, 2023. The offer is for a limited period, the bank said.

Bengaluru-based Jana Small Finance Bank too announced a new increase in interest rates on regular fixed deposits, effective February 1, 2023.

Customers will now get an interest rate as high as 8.10% on regular deposits for a tenure of more than 2-3 years, the bank said.

Also, customers can avail 8.25% on scheme called fixed deposit plus for a tenure of more than 2-3 years, the bank said. Senior citizens will get 8.80 per cent.Deposit rates go up

Many banks have increased their deposit rates in the recent past to lure more depositors expecting a pick-up in credit growth and cushion against likely tight liquidity.

Among major banks, State Bank of India (SBI), HDFC Bank and Kotak Mahindra Bank have raised their FD interest rates. Small finance banks (SFBs) like AU, Jana and Equitas hiked interest rates, too.

SBI increased the interest rates on FDs by 0.50 percent across various tenors. HDFC Bank and Kotak Mahindra Bank hiked the interest rates on FDs by 0.75 percent and 0.25 percent, respectively.

Among the SFBs, AU increased its interest rate on FDs by 0.25 percent; Jana and Equitas increased FD rates by 0.30 percent and 0.50 percent, respectively.

Risks with deposit and credit growth of banks

In the last few months, credit growth has overtaken deposit growth, meaning there is more demand for money but less supply in the market. Data with the Reserve Bank of India (RBI) showed that credit growth surpassed deposit growth in 2022.

Bank credit growth peaked at 17.2 percent compared to aggregate deposit growth, which stood at 9.8 percent till in September 2022, RBI data showed.

On February 3, Moneycontrol reported that banks are likely to raise interest rates on FDs because of impending competition from a new savings scheme announced in Budget 2023 that offers an annual rate of 7.5 percent.