The State Bank of India (SBI) has announced an increase in interest rates on retail term deposits by 25-75 basis points for deposits up to 1 year. The revised rates, which came into effect from May 15, 2024, mark a significant adjustment in the bank's deposit offerings.
For retail term deposits below Rs 2 crore, the revised rate stands at 5.5 per cent, a notable increase from the previous 4.75 per cent for the 46-179 days maturity bracket. Similarly, rates for the 180-210 days and 211 days to less than one year maturity periods have been adjusted to 6.0 per cent and 6.25 per cent, respectively, up from their previous levels.
Additionally, senior citizens are eligible for an additional 50 basis points on the revised rates as per the bank's norms. While interest rates remain unchanged for maturity periods beyond one year, SBI has raised rates for fixed deposits above Rs 2 crore across both short-term and long-term maturity periods.
The decision to hike rates primarily focuses on short-term deposits, with the bank expressing a cautious approach towards locking itself into high rates for long and medium-term deposits. This move reflects the bank's anticipation of a softening in rates later in the current financial year.
Industry experts anticipate that other banks will likely follow suit in adjusting their deposit rates, given SBI's market dominance. The competition for resources extends not only among banks but also from alternative segments such as mutual funds.
SBI's decision comes against the backdrop of its robust financial performance, with deposits growing by 11.13 per cent year-on-year (YoY) to Rs 49.16 lakh crore and advances by 15.24 per cent as of March 2024. The bank has set ambitious targets for further growth in deposits and advances for the fiscal year 2024-25.
According to analysts, the banking industry as a whole is expected to maintain its growth momentum, with credit offtake recording a significant increase in the previous fiscal year and expected to continue growing in the current fiscal year.