Shikha Sharma in Calcutta on Wednesday. Picture by Kishor Roy Chowdhury

Mumbai, July 28: A day after the Reserve Bank tightened its monetary policy, HDFC Bank today hiked deposit rates by 25-75 basis points across various maturities, while the State Bank of India said deposits were likely to fetch more as early as next month.

Bankers, however, said lending rates were unlikely to be raised for now, though they cautioned that loans could turn dearer in a month or two.

Axis Bank, another prominent private sector bank, also feels deposit rates will be raised first and then lending rates.

HDFC Bank today became the first lender to raise deposit rates. The revised rates will become effective from July 30.

The bank has raised term deposit rates with maturity between 91 days and six months by 75 basis points to 5.25 per cent from 4.5 per cent.

For deposits between 9 months and one year, the rates are up 50 basis points to 6.25 per cent.

The interest rate for deposits of more than one year is 7 per cent against 6.75 per cent, previously.

Even as the country’s second largest private sector bank raised deposit rates, SBI chairman .P. Bhatt said deposit rates could inch up as early as next month.

“There is an upward bias on the deposit rates. (Rates should move up) by August-September by at least 25 basis points,’’ Bhatt told newspersons on the sidelines of an event.

Axis Bank is also planning to increase its interest rates on deposits first. “We are reviewing the situation and a decision will be taken soon,” Axis Bank CEO Shikha Sharma told reporters on the sidelines of a seminar organised by Ficci in Calcutta today.

Axis Bank is targeting a credit growth of between 20 per cent and 21 per cent in this financial year. “Growth in deposits during the second quarter should be higher compared with the first quarter. But our credit growth is likely to be moderate during the second quarter,” Sharma said.

On Tuesday, the central bank hiked the reverse repo, the rate at which it absorbs excess liquidity from the system, by 50 basis points to 4.5 per cent; and the repo, which is the rate at which it provides liquidity to banks, by 25 basis points to 5.75 per cent.

With the banking system witnessing tight liquidity conditions, banks have been borrowing from the RBI’s repo window. However, they did not raise their deposit rates as credit growth was subdued.

According to RBI governor Duvvuri Subbarao, liquidity in the system is likely to remain tight.

Bankers feel that should the tight liquidity conditions persist and credit growth become more broad-based, they will have to offer more on deposits.

After the RBI announced its monetary policy yesterday, leading banks had said that lending rates were unlikely to be raised immediately.

Analysts feared that the apex bank’s policy might not be transmitted into the system.

RBI deputy governor Subir Gokarn, however, said that banks could raise deposit rates as credit growth picked up, a point reiterated by Subbarao in a conference call with analysts today. “Going forward we expect that transmission will take place and we will see some change in the deposit and lending rates of banks,’’ he said.

Meanwhile, Lakshmi Vilas Bank has raised interest rates by 25 to 50 basis points on domestic term deposits for 181 days and up to two years.

The new interest rates will become effective from August 2.

Moody’s rating

Global rating agency Moody's today kept the local currency deposit ratings of Indian banks unchanged at a grade that is two notches up from India's sovereign rating.

The bank deposits, at “Baa” grade, implies that they will be able to fulfil financial commitments, even though there is moderate credit risk in the medium term.