MUMBAI: Banks, especially public sector ones led by the State Bank of India and Bank of Baroda among others, which have been scrambling for deposits for quite some time as their assets have been growing at much higher rates than liabilities, are on a fund-collection spree now offering higher pricing for short-term, limited period fixed deposits. The new offers vary from 360 to 666 days and are priced at a low of 7.05 percent and peaking at 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.
Leading banks, including State Bank of India and Bank of Baroda, have launched special tenure deposit schemes, offering higher interest rates. BoB is offering higher interest rates for 399 (7.25 percent) days and 333 days (7.15 percent) under its monsoon deposit scheme offering higher.
Similarly, SBI, which commands a fifth of the system-wide liabilities, has unveiled a new term deposit scheme for 444 days (7.25 percent) and 400 days (7.1 percent).
The BoB scheme, which opened from July 15, 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).
Similarly, SBI is offering an interest rate of 7.25 percent per annum on a deposit of 444 days, effective from July 15 and senior citizens get an additional 0.50 percent (7.75 percent) for 444 days. The scheme is valid till March 31, 2025.
To make a comparison, for one-year FD, BoB, which is the second largest public sector lender, offers 6.85 percent per annum, while under the new offer it is giving 7.1 percent for 360 days.
Among the highest paying ones are Bank of India (7.3 percent per annum) for 666 days and Indian Overseas Bank (7.3 percent) for 666 days.
Most of these banks are offering between 7.1 and 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; the Bengaluru-based Canara Bank is offering 7.25 percent for 444 days money; while the city-based Central Bank of India is wooing a depositor with 7.3 percent for 555 days money and 7.25 percent for 444 days money.
Chennai-based 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.
Surprisingly, Indian Overseas Bank is offering 7.3 percent for both 666 days and 444 days. Similarly, the third largest public sector lender Punjab National Bank is offering 7.25 percent each for 400 and 444 days.
The Jalandhar-based Punjab & Sindh Bank is offering 7.25 percent for 444 days and 7.15 percent for 333 days, the Kolkata based Uco Bank is offering the lowest at 7.05 percent for 400 days, while the city-headquartered Union Bank of India is pricing 399 days money at 7.25 percent.
These limited period fixed deposit schemes are ideal for risk-averse investors looking for assured returns in a relatively short period. Typically any pricing above 7 percent is considered worth trying.