Banks hike interest rates on FDs to raise more deposits

The scheme offers an additional 0.65 per cent interest above the standard fixed deposit rates

Mumbai: Banks have started offering higher returns on FDs amid fierce competition to raise more deposits. While leading banks such as SBI and HDFC were the first to raise interest rates on FDs, smaller banks such as IDBI have followed suit for fear of getting left behind in the race.

SBI introduced a new category of super senior citizens above 80 years — who will get 10 basis points more than senior citizens. This scheme has been adopted by IDBI Bank as well. IDBI Bank has launched the ‘IDBI Chiranjeevi-Super Senior Citizen FD’, a fixed deposit product exclusively for individuals aged 80 years and above.

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The scheme offers an additional 0.65 per cent interest above the standard fixed deposit rates. The interest rates under this scheme include 8.05 per cent for a 555-day tenure, 7.9 per cent for 375 days, 8 per cent for 444 days, and 7.85 per cent for 700 days. The scheme is effective from January 13, 2025.

As part of the new innovative savings schemes, the State Bank of India (SBI) has also introduced a ‘Har Ghar Lakhpati’ (lakhpati in every home) recurring deposit scheme. The objective of the scheme is to enable individuals to accumulate a corpus of Rs one lakh or more through small monthly savings over three to ten years.

Individuals, including minors aged 10 and above, are eligible to open an account. For people under age 60, the scheme offers interest rates of 6.75 per cent for tenures of three and four years, and 6.50 per cent for tenures of five to 10 years. For those above 60, it offers 7.25 per cent for three and four years, and 7 per cent for years five to 10.

Similarly, Bank of Baroda has rolled out liquid fixed deposits, customers can withdraw in units of Rs 1,000 after an initial deposit of Rs 5,000. Deposits exceeding Rs 5,000 must also be in multiples of Rs 1,000.

Finance Minister Nirmala Sitharaman, at a review meeting held earlier, asked the chiefs of public sector banks to accelerate the growth rate of their deposits to match the quicker pace at which the credit is growing. The growth rate of deposits at the time was 3 to 4 per cent slower than the pace at which credit was growing in recent months which was seen as posing a risk of asset-liability mismatch in the banking system.