SBI Raised Deposit Rates

India’s largest public sector bank, State Bank of India raised deposit rates by 50 to 150 basis points (bps) giving a clear indication that lending rates are set to rise by the end of this month. The new deposit rate was mad3e effective from 7 December 2010. The sharpest hike is in 46 to 90-day slab where SBI will offer 5.50% as against 4% earlier. In case of one year deposits the SBI will offer 7.25% as against 6% earlier. The bank will offer 8.50% for 555-days and 1000-days deposit. The Reserve Bank of India (RBI) had told banks that their lending rates should factor in the increased or decreased cost of deposits.

Public as well as private sector banks have been hiking deposit rates since end of November  2010 with an objective to get the most of the Rs 1.2 lakh crore of certificate of deposits (CDs) that are coming up for renewal in December 2010. Analysts fear that the lending rates will follow the spiralling deposit rates. SBI joined the bandwagon with its latest hike in deposit rates by 0.5-1.5 per cent across maturities.

ICICI Bank and three public sector banks - Punjab National Bank, Syndicate Bank and Bank of India also raised their deposit rates. Home finance major Housing Development Finance Corporation (HDFC) announced recently its decision to raise its deposit rates.