MUMBAI: A week after it ruled out engaging in interest rate war to attract deposits, HDFC Bank, the largest private sector lender and the one with the highest credit-deposit ratio, has upped the ante in its war for public funds as it seeks to grow its assets faster, offering up to 7.4 percent for fixed deposits below Rs 3 crore for 55 months. The closest rate is 7.3 being offered by a few much smaller public sector peers while the industry leader SBI’s peak offer is 7.25 percent per annum after the recent hike.
Earlier this month, almost all public sector banks led by SBI, BoB and PNB increased their pricing for FDs and is offering between 7.05 and 7.30 percent.
HDFC Bank is the first major private sector lender to reopen the war for deposits in recent months and is now offering 7.35 to 7.40 percent on fixed deposits below Rs 3 crore for 35 months and 55 months tenors, the bank said on its website and the new rates are effective immediately.
The move comes after the bank saw a decline in deposit accretion sequentially in the first quarter of FY25 to Rs 23.79 trillion. “This time around we were surprised with the period-end numbers because of some unexpected flows in the current account, which were more than what we had anticipated,” said Sashidhar Jagdishan, the managing director and Chief Executive Officer, of the bank had told analysts in the first-quarter earnings call earlier this month.
Jagadishan had told the analysts that, “We are very cognisant of the risks that are there in the system and instead of being nudged on that, we want to do it ourselves because it makes economic sense to bring it down as quickly as possible and our aim is to reduce the credit-deposit (CD) ratio “as quickly as possible” while maintaining its commitment to profitable growth.
However, he was quick to add that the bank has not received a directive from the Reserve Bank on the timeline to cut the ratio. “We have not received any regulatory prescription but at the same time, the thought process is that, can we, to the best of our ability, bring it down as quickly as possible and still maintain the objective of profitable growth,”he explained.
He had then also said the bank wanted grow its advances slower than its deposits with a view to bring down its elevated credit–deposit ratio. During the analyst call, he said the bank would not go for any competition to garner deposits instead would rely on “engagement and service delivery” to get the funds needed to fuel its growth.
“The rate is not a predominant determinant or driver for us to have an engagement. We don’t get into rate competition; we are priced fairly with our peers. And this is not something that we want to use to gather more deposits,” said the bank.
State Bank and Bank of Baroda are among the public sector banks that have launched special deposit schemes and are offering attractive interest rates for a limited period of time to garner more deposits. SBI’s 444-day monsoon special retail deposit scheme is offering 7.25 percent interest while BoB’s special scheme offers 7.25 percent for 399 days and 7.15 percent for 333 days. The state-run banks’ new offers vary from 360 to 666 days and offer a low of 7.05 percent and peak of 7.3 percent.
Money has been moving out of bank tellers for long in fact since the pandemic and finding their ways into equities and mutual funds which have been offering much better returns. Banks didn’t take this flight of money out of their tellers seriously initially as credit demand was also not robust. But since the past 18 months or so credit demand has changed and have been hovering around 16 percent while the deposit accretion has 10-12 percent only.
And this has the Reserve Bank getting worried over a possible asset-liability mismatch. Recently, governor Shaktikanta Das met bank CEOs and asked them to address the gap that leads to asset-liability mismatches.
SBI is giving 7.25 percent for 444 days and for 400 days at 7.1 percent. Similarly, BoB also offers senior citizens an additional interest rate of 0.50 percent (7.75 percent for 399 days and 7.65 percent for 333 days. SBI is offering senior citizens get an additional 0.50 percent (7.75 percent) for 444 days. The scheme is valid till March 31, 2025.
Bank of India and Indian Overseas Bank are offering 7.3 percent 666 days and 7.1-7.25 percent for 400 to 600 days. Bank of Maharashtra is offering 7.25 percent 666 days and 7.1 percent for 400 days deposits; Canara Bank is offering 7.25 percent for 444 days money; while the city-based Central Bank is wooing a depositor with 7.3 percent for 555 days money and 7.25 percent for 444 days money. Indian Bank fetches you 7.25 percent return if you park the money for 400 days and 7.05 percent if the tenor is 300 days.
Indian Overseas Bank is offering 7.3 percent for both 666 days and 444 days and PNB is offering 7.25 percent each for 400 and 444 days. While Punjab & Sindh Bank is offering 7.25 percent for 444 days and 7.15 percent for 333 days, Uco Bank has the lowest at 7.05 percent for 400 days, while Union Bank is pricing 399 days money at 7.25 percent.