SBI hikes fixed deposit interest rates by upto 75 basis points

The State Bank of India (SBI) has announced an increase in interest rates for certain fixed deposits (FDs), effective Wednesday, May 15. This adjustment sees a rise of up to 75 basis points (bps), or 0.75%, for deposits below ₹2 crore.

New Interest Rates Overview

– 46 Days to 179 Days: The interest rate for FDs maturing within this tenure has been increased by 75 bps, bringing the new rate to 5.50%.

– 180 Days to 210 Days: Interest rates for this period have been raised by 25 bps to 6.00%.

– 211 Days to Less Than 1 Year: The revised rate now stands at 6.25% after a 25 bps hike.

Context of the Rate Hike

This move by SBI follows the April 2024 decision of the Reserve Bank of India (RBI) Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, to keep the repo rate steady at 6.5% for the seventh consecutive time. Prior to this, the RBI had implemented six consecutive rate hikes totaling 250 basis points up until April 2023.

Transmission of Repo Rate Changes

Despite the substantial increases in the repo rate, there has been a lag in the corresponding rise in bank deposit rates. RBI Governor Das highlighted in October 2023 that the increase in repo rates had not been fully reflected in the bank deposit rates. Over time, banks, including SBI, have been adjusting their FD interest rates to align more closely with the RBI’s policy changes.

 Implications

The recent hike in FD rates by SBI indicates a continued effort to offer competitive returns to depositors in response to the RBI’s earlier policy actions. This adjustment benefits customers by providing higher returns on their fixed deposits, especially for short to medium-term maturities.