RBI forecasts spike in deposit rates as banks race harder to mop up funds

Banks, public as well as private sector, have been asked to keep all branches open till end of this month

The competition to garner more deposits among banks can lead to a further rise in deposit rates going ahead, the Reserve Bank of India (RBI) said in its monthly Bulletin.

Banks have repriced their deposit rates higher in recent months to mobilise funds. The intensifying competition among banks to expand their deposit base may impel banks to increase deposit rates going ahead, the Bulletin said.

Comparing the growth in the numbers of different types of deposits, the bulletin showed that term deposits recorded a growth of 13.2 percent, whereas current and savings deposits increased at 4.6 percent and 7.3
percent, respectively.

"As returns on fixed deposits (FD) improved and differentials with savings deposit rate increased in the recent period, the lion’s share of bank deposits
accrued to term deposits," the bulletin said.

Banks, public as well as private sector, have worked on different deposit rates to boost their deposits.

Recently, public sector lender Bank of Baroda raised its interest rates on retail term deposits by 25 bps on select tenors.

Among foreign banks, Deutsche bank offers the best interest rate of 7.50 percent interest on FDs of three-year tenures.

Among small finance banks, AU Small Finance Bank and Equitas Small Finance Bank are offering 7.75 percent interest on FDs.

Also read: FD rates go up: These banks offer up to 7.85% interest on three-year fixed deposits