SBI jacks up bulk deposit rates by 75-140 bps in second hike in 2 months
The country’s largest bank, State Bank of India, raised interest rate on domestic bulk term deposits on Tuesday by 75-140 basis points with immediate effect, at a time when liquidity in the system is under strain.This is second hike in bulk deposit rates by SBI in a span of about two months.
It had raised bulk term deposits by one per cent (100 basis points) in November 2017.
Elaborating on the reasons for the current hike rate, P K Gupta, managing director (retail and digital banking) told Business Standard that the rates the bank offered on bulk money were below those offered by competing banks. So this is really a realignment of rates.
Deposits of Rs 10 million (Rs one crore) and above are classified as bulk deposits.
The bank has sufficient liquidity but that in the system is under strain. In fact, there is a liquidity deficit of about Rs 100-150 billion (Rs 10,000-15,000 crore), he said.
The share of bulk deposits rates in SBI’s total deposits is small and it will not make much of a difference to its cost of funds, Gupta added.
The bank hasn’t tinkered with retail term deposits and has left lending rates untouched this time around. SBI executives said the Asset Liability Committee continues to review rates on regular basis.
For short-term deposits (46-179 days and 180-210 days), it will offer 6.25 per cent, up from 4.85 per cent. SBI will pay 6.25 per cent interest rate on deposits between one year and less than two years (5.25 per cent earlier).
Deposits with maturing between two and 10 years, the new rate is 6 per cent (5.25 per cent).
In November 2016, SBI had slashed bulk deposit rates by up to 1.9 per cent (190 basis points), taking advantage of the surge in deposits with demonetisation.