With the competition for attracting funds turning intense, State Bank of India has hiked the interest rates on saving bank deposits by 30 basis points to 3.0 per cent for balances of Rs 10 crore and above.
The interest rates for deposits below Rs 10 crore remain unchanged at 2.70 per cent. The revised rates are applicable from October 15 onwards, the country’s largest bank said in a statement.
Senior SBI executives said while savings bank account have predominantly money from the retail sector — household and individuals — some institutions and government departments also maintain funds in such accounts. Retail funds are more stable, while institutional money is volatile so the bank has to offer sops to retain and get money from them.
Banks are already embroiled in an interest rate war for term deposits of Rs two crore and more (bulk deposits), so savings account can’t stay away from this trend, the executives said.
Asked about the possibility of a revision in the savings rate for deposits of up to Rs 10 crore, SBI executive said there is no pressure for now. However, the Bank is monitoring the situation, given a growing gap between credit demand and amount mobilised through deposits.
The share of CASA (current accounts and savings accounts) in total deposits was 45.33 per cent as of June 30, 2022, down marginally from 45.97 per cent a year ago. SBI’s CASA deposits grew by 6.54 per cent year on year (YoY) to Rs 17.68 trillion by June 2022-end.
Deposit rates have not moved in tandem with lending rates despite the monetary policy committee (MPC) of the Reserve Bank of India (RBI) raising the benchmark repo rate by 190 bps since May this year.
This has weighed on the deposit growth seen in the economy so far. According tp the latest RBI data, for the fortnight ended September 23, deposits grew by 9.2 per cent year on year (YoY) but credit growth was 16.4 per cent. The credit-deposit growth gap has been widening for the past few months, exacerbating analysts’ concerns that slow deposit growth could act as a constraint for loan growth going forward.
But with banking system liquidity shrinking as RBI pulls out the excess liquidity to tame inflation and high credit growth in the economy, industry experts had suggested that sooner rather than later banks have to increase deposit rates to garner durable liquidity to fund credit growth in the system.
According to RBI’s October bulletin, banks raised their term deposit rates in H1 of 2022-23 amid moderation in systemic liquidity. Banks increased their bulk term deposit rates more relative to retail deposit rates. The weighted average domestic term deposit rate (WADTDR) on fresh retail deposits rose by 39 bps during May-August 2022, while the WADTDR on total fresh deposits (both retail and bulk) was up by 100 bps. The median term deposit rate on fresh retail deposits – the prevailing card rates – rose by 26 bps during May-September 2022.