Rising FD rates to bring some cheers for depositors

NEW DELHI: There is some good news for retired persons and those
dependent on the interest income as banks have started increasing
their fixed deposit rates following the decision of the RBI to hike
the short term lending rate by 0.25 per cent.

Oriental Bank of Commerce yesterday revised their fixed deposit rates
for various maturities and raised the rates for its special deposit
scheme Asha Kiran (FDs for 400 days) to 9.75 for senior citizens.

This is probably the highest interest rate being offered by the city
based public sector lender on 13-month deposit.

Though the senior citizens would get a rate of 9.75 per cent, others
will receive 9.25 per cent for 400-day fixed deposit from OBC.

Even the new generation private sector lender Yes Bank increased the
deposit rates by 0.5 per cent across all maturities.

After the recent revision of interest rates by Yes Bank, senior
citizens would get a maximum of 10 per cent on fixed deposits with a
maturity of one year to 18 months. The others would receive a return
of 9.5 per cent.

Country's largest public sector lender, State Bank of India, also
revised fixed deposit rates upward by up to 0.5 per cent for selected
tenures effective June 1.

SBI increased fixed deposits rate for 5-10 years by 0.5 per cent to 9
per cent while 3-5 years tenure was hiked by 0.35 per cent. Senior
citizens will get 0.5 per cent more.

Another Mumbai-based lender Bank of India also increased deposit rates
up to 0.5 per cent for various maturities.

For deposits having a maturity of one year to less than two years, the
revised rates stands at 9.15 per cent, against the earlier rate of
8.50 per cent, while for deposits ranging from two to three years, the
new rate is 9.25 per cent as against earlier rate of 8.75 per cent.

Similarly, fixed deposits of Bank of India having a maturity of three
to five years will earn 9.50 per cent interest, against the earlier
8.75 per cent.

"The rates have been revised with a view to mobilise funds from
deposits in the beginning of the financial year. We will review our
rates by June 30, after which they might be revised again," the BOI
official had said.

There would be a case for further upward revision of fixed deposit
rates in case the inflation, as projected by many analysts, goes up to
10 per cent.

Moreover, the banks would have to raise fixed deposit rates to retain
the deposit base, says brokerage firm Edelweiss Capital in its recent
analysis on impact of repo rate hike on the banking sector.

The study further pointed out that following recent hike in repo rate,
bottomline of those banks which are dependent on wholesale money
market for funds would come under pressure.