Private sector lender Kotak Mahindra Bank on December 11 increased interest rates on fixed deposits (FDs) of less than Rs 2 crore for customers by up to 85 basis points. One bps is one hundredth of a percentage point.
Accordingly, the interest rate on FDs for regular customers have gone up by 50 bps across tenures, the bank said. For senior citizens, the rate of interest has been increased by 85 bps.
“FD rates for senior citizens have increased by up to 85 basis points (bps) across various tenures,” the bank said in a press release.
For tenures ranging from 23 months to 2 years, senior citizens can earn up to 7.80 percent, the bank said.
Regular customers investing less than Rs 2 crore also benefit due to the 50 bps increase for FDs with tenures of three to four years, the bank added.
Further, the press release said that the rates have jumped to 7 percent and additionally, rates on FDs of tenures till four to five years see a hike of 75 bps to 7 percent from 6.25 percent.
In its December 2023 monetary policy committee (MPC) meeting, the central bank kept the repo rate at which banks borrow short-term funds from the central bank at 6.5 percent. The MPC has kept the repo rate unchanged at 6.5 percent in the past four monetary policy reviews, after raising the rate by 250 basis points since May 2022.
Also read: Banks yet to fully pass on RBI rate hikes to customers, shows data
Slow rate transmission
RBI has cautioned banks that the rate transmission from their end has been incomplete. “The transmission of the 250 bps increase in the policy repo rate to bank lending and deposit rates is still incomplete,” Das said during the October 2023 Monetary Policy Committee press conference.
As per RBI data, the weighted average domestic term deposit rate of banks increased by 233 basis points (bps) and the weighted average lending rate on fresh loans rose by 196 bps in the current tightening cycle. The corresponding increase in outstanding term deposit rates and outstanding lending rates of banks was even lower at 157 bps and 112 bps, respectively.
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