Depositors can expect more hike in FD rates

While this increase is not as much as the increase in lending rates, depositors could still expect to earn 7-7.5% in FDs with tenure from 3-5 years.
Image used for representational purpose only. (File Photo)
Image used for representational purpose only. (File Photo)

Bank fixed deposits have become attractive again, after more than two years, when deposit rates had fallen below 6% giving depositors negative real rates.

But things started changing in the second half of 2022, when after a series of repo rate hikes banks had finally started increasing the deposit rates. The RBI since May 2022 has increased the key policy rate by 250 basis points, and while the transmission of this hike has been immediate in the case of lending rates, the same has been slow when it comes to deposit rates.

The banks have increased the deposit rates by 150-170 basis points in the past one year. While this increase is not as much as the increase in lending rates, depositors could still expect to earn 7-7.5% in FDs with tenure from 3-5 years.

Some banks started offering special rates — as high as 7.75-8% — to fixed depositors in the second half of 2022, when liquidity in the banking sector started drying up. These special FD schemes have tenure ranging from 400-800 days and were available for a limited period. For example, the Bank of Baroda launched the Baroda Tiranga Deposit scheme offering up to 6.85% interest on 444- and 555-day FDs. Bandhan Bank was offering 7.5% on a 600-day FD for retail investors with deposit amounts up to Rs 2 crore. State-owned Bank of India launched ‘Star Super Triple Seven Fixed Deposit’ scheme, under which it is offering 7.25% on a 777-day FD.

With every increase in repo rate by the RBI, banks have been increasing the FD rates as well. After a 25 basis points hike in February 2023, many banks raised the FD rates during the month. ICICI Bank has raised interest rates in the range of 25 to 50 bps on retail deposits of less than Rs 2 crore. The bank is now offering interest rates up to 7.10% per annum on fixed deposits For senior citizens, the bank is offering 0.5% more interest on these deposits.

The country’s largest lender SBI raised interest rates on select fixed deposits (FDs) by up to 25 basis points (bps) on February 15. PNB has raised interest rates on select FDs by up to 30 bps. The highest interest rate offered by the bank to regular citizens is 7.25% for a tenure of 666 days. Yes Bank has increased rates on FDs by 25 to 50 bps.

With analysts expecting RBI to increase the repo rate by 25 basis points after its monetary policy committee meeting in April, the FD rates might increase further.


The country’s largest lender SBI raised interest rates on select fixed deposits (FDs) by up to 25 basis points (bps) on February 15. PNB has raised interest rates on select FDs by up to 30 bps

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