The hike in key policy rates was announced by the Reserve Bank of India (RBI) in an unscheduled announcement on May 4. Soon after, a group of banks increased their interest rates on fixed deposits (FDs).
The Reserve Bank of India (RBI) on Wednesday announced to increase the policy rate from 0.40 percent to 4.40% to control inflation. After this many banks have increased the interest rates on loans. At the same time, some banks are engaged in increasing the interest rate. Banks have started increasing their home loan and other rates within 24 hours of RBI’s announcement. It is a matter of relief that some banks have started increasing the interest rates on their FDs as well.
Five banks hike FD rates
A day after RBI rate hike, at least five banks have increased FD rates. Analysts expect other banks to announce hike in lending and deposit rates soon. Kotak Mahindra Bank said in a statement that it has increased the interest rates on fixed deposits by 30 basis points and 35 basis points, respectively, for tenures of 390 days and 23 months.
These banks increased rates
A group of banks have increased their interest rates on FDs soon after the Reserve Bank of India (RBI) hiked the key policy rate in an unscheduled announcement on May 4. These lenders include Bandhan Bank, Kotak Mahindra Bank, Jana Small Finance Bank, Bank of Baroda and ICICI Bank. These lenders have announced hike in deposit rates across multiple tenor baskets for retail customers.
Rate hiked on these FDs of Kotak and Bandhan Bank
Kotak Mahindra Bank said in a statement that it has increased the interest rates on fixed deposits by 30 basis points and 35 basis points for tenures of 390 days and 23 months, respectively. Similarly, Bandhan Bank has also increased the interest rate on deposits of one year by 50 basis points for deposits of less than two years to 18 months and above 18 months by 50 basis points.
This follows the hike in lending rates by banks. Many banks have already increased their lending rates. These include Bank of Baroda and ICICI Bank. ICICI Bank has increased the external benchmark lending rate by 40 basis points to 8.10 per cent.
Good news for fixed deposits
Analysts expect more banks to announce hike in lending and deposit rates soon. The central bank on May 4 raised the repo rate by 40 basis points to 4.4 per cent for the first time in nearly two years since the start of the pandemic in 2020. This move of RBI will affect the borrowers. According to analysts this is good news for those investing in fixed deposits.
Prakash Agarwal, a banking analyst and president of financial services at India Ratings and Research, said that since nearly 40 per cent of the banking system’s loans are repo-linked, they are automatic with an increase of the same amount in all repos. will become increasingly expensive.
