As the competition to garner deposits intensifies amid tight liquidity and high credit growth, private sector lender IDBI Bank has come out with a limited period offer on its term deposits, and is offering an interest rate of 7.6 per cent for a tenure of 700 days, effective December 2022.

This is one of the highest interest rates being offered in the banking industry.

The country’s largest lender, State Bank of India, is offering an interest rate of 6.75 per cent on deposits held for one year to less than two years and on those held for two years to less than three years.

Punjab National Bank and Canara Bank are offering peak interest rates of 7.25 per cent and 7 per cent, respectively, on 666-day deposits.

While Bank of Baroda is offering 7.05 per cent on 399-day deposits, Bank of India will pay 6.75 per cent on 444-day deposits and on those held for two years to less than three years.

Previously, IDBI bank had revised interest rates on its retail term deposits of up to Rs 2 crore, effective December 19. Following the revision, the bank is offering interest rates of 3–6.75 per cent for different tenures.

Banks have made a beeline to increase rates on their deposits as liquidity in the system has tightened and the credit growth in the system has remained consistently high. According to the latest print, bank credit grew by 17.5 per cent year on year (YoY) to Rs 131.06 trillion in the fortnight ended December 2.

Major banks such as HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank raised the interest rates on their deposits earlier this month. IDFC First Bank, Equitas Small Finance Bank, and AU Small Finance Bank had also revised their deposit rates over the past few weeks.

The country’s largest lender State Bank of India (SBI) had also raised deposit rates by 15-100 basis points, the maximum increase being for bulk deposits. And on the critical 1–3-year deposits, SBI has raised rates by 50-65 bps.

According to RBI data, deposit mobilisation rose 9.9 per cent YoY to Rs 175.24 trillion during the fortnight ended December 2, a significant improvement from 9.6 per cent a fortnight ago. Deposit growth is picking up gradually as banks have begun to pass on the rate hikes done by the RBI.