After nearly a decade, State Bank of India (SBI) has upped the ante to contract bulk term deposits of Rs 2 crore and above by raising interest rates. The new rates, with the hikes being steeper on the longer end, come into effect from 10 May.

This is something that the country’s largest bank was not seriously considering. But with the possibility of the Reserve Bank of India (RBI) imposing a series of rate hikes during the course of the year, SBI is looking to shore up its liquidity.

“We have to lock up money, especially on the longer end. Considering that more rate hikes are in the offing, we will have to contract deposits at lower rates and for a longer term. We were not looking at bulk deposits seriously so far. But if we do not act now, money could get expensive. Even now we are not at par with our private sector peers,” said a senior SBI official.

For bulk deposits maturing in two years to less than 3 years, the bank has raised the interest rate by 65 basis points to 4.25%, from 3.6% previously.

On deposits maturing in three years to less than five years and five years up to 10 years, the bank is now offering interest rate of 4.5% from 3.6%. Term deposits maturing in 180 days to 210 days will now fetch 3.5%. Fixed deposits with maturity between 46-179 days will get 3.5%, up by 50 basis points.

The bank has not hiked the interest rate for deposits maturing in 7 days to 45 days. They will continue to earn interest rate of 3%.

The revised rates of interest are applicable to fresh deposits and renewals of maturing deposits. The interest rates on NRO term deposits shall be aligned as per the rates for domestic term deposits. These rates of interest shall also be made applicable to domestic term deposits from co-operative Banks, SBI said on its site.

Senior citizens would be eligible to get an additional rate of 50 basis points over and above the rates applicable for general people.

“The hike in repo rate and the cash reserve ratio (CRR) made it very clear that inflation targeting will be the main focus of the central bank. Banks will have to improve their liquidity to prevent any asset-liability mismatches taking place. They will also have to be ready for credit growth as demand picks up,” said another SBI officer.

Last week, the RBI raised the repo rate immediately by 40 basis points to 4.40% and said the CRR would be hiked by 50 basis points to 4.50% from 21 May.

For retail fixed deposits below Rs 2 crore and maturing between 7 days to 10 years, the bank will give 2.9% to 5.5% interest rate to general customers. Senior citizens will get 50 basis points (bps) extra on these deposits - 3.4 %to 6.30%. These rates are effective from 15 February 2022.

Interest had bottomed out before the RBI’s repo rate hike and savers were earning negative real returns with inflation hovering over the 6% mark. The hike in deposit rates has come as a welcome change for the savers. But the bulk deposits are generally contracted from corporates and high net worth individuals.

Last month, SBI had hiked its marginal cost-based lending rate (MCLR) upwards by 10 basis points, even before the repo rate hike by the RBI.

Punjab National Bank, Union Bank of India, Bandhan Bank, Kotak Mahindra Bank and Jana Small Finance Bank are some of the banks which have increased interest rates on fixed deposits across multiple tenor baskets for retail customers.

Among the non-banking financial companies (NBFCs), Bajaj Finance has raised interest rates by up to 10 basis points on its fixed deposits (up to Rs 5 crore) for tenor between 36 months to 60 months, effective from May 10. The revised interest rates will be applicable to fresh deposits as well as renewals of maturing deposits.

Deposits of 36 to 60 months will earn a return of 7%. Deposits between 12 and 23 months will continue to fetch an interest of 5.75% while deposits between 24–35 months will earn an unchanged interest rate of 6.40 %.