Mumbai, Jan. 20: Savers across the country can rejoice: banks are winching up interest rates on medium-term deposits to 9 per cent — a level that’s not been seen for many years.
State Bank of India, the country’s largest bank, is offering 9 per cent for a three-year deposit under its new Platinum Deposit Scheme that it unveiled today.
ICICI Bank, the country’s largest private bank, is also offering 9 per cent on an 890-day deposit — which makes it the best in the business.
The 9 per cent interest rate on these bank deposits is half a percentage point higher than the rate that the government offers on employee provident fund deposits, which has served as a touchstone for interest rates on savings.
The new bank deposit schemes now rank on a par with the senior citizens’ scheme with the advantage of a shorter tenure.
SBI has peppered its latest scheme with attractive features. While the maximum period of deposit is three years, the depositor will have the right to exercise a ‘put option’ — which grants the right to sell at a specified price at a specified date — to receive the deposit with an accrued interest of 8.25 per cent on the expiry of one year and 8.50 per cent at the end of two years.
There is no penalty for exercising the put option, but no interest will be paid if the deposit is withdrawn before the end of one year. The scheme is valid up to March 31.
The new deposit schemes could signal the start of a rate war among banks to attract deposits at a time when they are finding it hard to rustle up resources to meet the burgeoning demand for credit.
SBI has revised its deposit rates three times in the past month. Last December, it raised rates on domestic term deposits by a quarter to three-quarter of a percentage point.
On January 6, the bank announced that interest rates on domestic term deposits of Rs 15 lakh and above, but less than Rs 1 crore, would earn interest at the rate of 8.25 per cent across all maturities of one year and above.
Although this measure was largely aimed at bulk deposits, SBI said last week that it would pay 8.25 per cent on all deposits irrespective of the amount from January 22.