SBI Hikes Fixed Deposits Interest Rate; Compare Bank FD Rates for March 2018

India’s largest bank, State Bank of India (SBI) hiked FD rates as it announced the revision in interest rates on ‘retail domestic term deposits’ (below Rs 1 crore).  The rates are hiked by 10 to 50 basis points across various maturities, and are effective from February 28th, 2018.

The bank has also revised interest rates on ‘domestic bulk term deposits’ of Rs 1 crore to Rs 10 crore as well as above Rs 10 crore, also effective from February 28th. This is the third hike in the bulk deposits within few months. Accordingly, Senior citizens will get 7 per cent on their deposits, up from 6.50 per cent earlier.

Moreover, this rate hike means there will a hike in the lending rate, even though Reserve Bank of India (RBI) in February had kept its policy rates unchanged for the third time. Further, as India’s largest bank has hiked retail deposit rates, other banks are likely will also follow the same path.

However, banks like Punjab National Bank and Karnataka Bank have also hiked their deposit rates.

Bank FD Interest Rates for March 2018 (Below Rs 1 crore) 

Bank	Tenors	Existing for Public w.e.f. 01.11.2017	Revised For Public w.e.f. 28.02.2018	Existing for Senior Citizens w.e.f. 01.11.2017	Revised for Senior Citizens w.e.f. 28.02.2018
SBI	1 year	6.25	6.4	6.75	6.9
HDFC Bank	1 year	6.75	No Update Yet	7.25	No Update Yet
ICICI Bank	1 year	6.75	No Update Yet	7.25	No Update Yet

The private banks offer better deposit rates than public sector SBI bank

SBI Liquidity Conditions

The rates are hiked as the liquidity in the system has dried up. There is tight liquidity conditions because of lower government spending and monetary tightening. Currently, the liquidity position is at a slight deficit of around Rs. 15,000 crore due to the tax outflows and lower government spending. As lending rates under MCLR (marginal cost of funds-based lending rates) are based on the incremental cost of funds, it may lead to some rise in lending rates as well.

Axis Bank has already hiked its benchmark marginal cost of funds based lending rate (MCLR) by 10 bps in the 3-month to 3-year buckets effective from February 17^th, 2018.

On the other hand, to increase the liquidity banks have an option to reduce their statutory liquidity ratio holdings and to deploy the same towards incremental credit. However, they might not to do so, as it will trigger an upward movement in bond yields and will add to their treasury losses.

Meanwhile, rating company ICRA Ltd had expected incremental bank credit offtake to rise this quarter because of seasonal factors. 

Overall, SBI is focusing on deposit mobilization to support the credit growth by offering better rates to depositors and to reduce the tightened liquidity conditions.