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Mumbai, Aug. 18: State Bank of India (SBI), the country's largest bank, today raised interest rates on fixed deposits by 25 to 50 basis points, setting the stage for other banks to follow suit.
SBIís decision comes days after it had raised the prime lending rate (PLR) that had a knock-on effect on housing loans which turned dearer.
The rate revision is being seen as yet another indication of the rising interest rate regime.
The rate rejig began last month when the Reserve Bank of India (RBI) raised the reverse repo and the repo rate by 25 basis points to 6 per cent and 7 per cent, respectively in an effort to combat inflation.
Bankers say the SBI move to hike deposit rates reflects the trend among banks to garner resources by offering attractive rates of interest as the entire sector continues to witness a robust demand for credit.
Effective Saturday, deposits parked with SBI and those in the maturity bucket between seven and 14 days will come with an interest rate of 3.50 per cent from 3 per cent earlier and those between 15 and 45 days will get an interest rate of 4.75 per cent (4.50 per cent).
Similarly, the interest rate on deposits between 46 and 179 days will now stand at 5.25 per cent against 5 per cent earlier, between one year and less than three years at 6.75 per cent (6.25 per cent), three years and less than five years will come at 7 per cent (6.50 per cent). The interest rate on deposits of five years and above will stand at 7.25 per cent against 7 per cent earlier.
Senior citizens will enjoy a higher interest rate of 50 basis points on deposits between one year and less than three years, three years and less than five years and five years and above.
The bank also announced that interest rate on its Super Saver Term Deposit has also been revised. Here fixed deposits for tenure of six years and up to 10 years (less than Rs 1 crore) would attract an interest rate of 8.25 per cent from 7.75 per cent earlier, while the rate on those above Rs 1 crore will now stand at 8.5 per cent, up from 8 per cent earlier.
Under this scheme, senior citizens parking their money will get an interest rate of 8 per cent (7.50 per cent).
This is the third time in this calendar year that SBI is raising deposit rates. The previous revision was done in late April.
With the country's largest bank raising deposit rates, the focus has now turned to its peers.
Bankers feel that other private and nationalised banks are set to follow suit in the days to come. After the RBI had hiked the reverse repo and the repo rates, some of the leading public sector banks revised their lending rates.
Bank of Baroda (BoB), however, was one which had also raised deposit rates by 25 to 50 basis points. It is expected that BoB may go in for another revision in select maturity buckets where SBI offers a better rate of return.