The State Bank of India, the nation’s largest bank, has raised its fixed deposit (FD) interest rates for certain maturity periods. The increase varies between 0.25 percent and 0.75 percent. The revised rates have been effective since Wednesday, May 15.

The State Bank of India has raised the interest rates on fixed deposits below Rs 2 crore. The hike applies to three specific tenures: 46 to 179 days, 180 to 210 days, and 211 days to just under a year.

For a fixed deposit of Rs 5 lakh with a tenure of 46 to 179 days, the interest rate is 5.50 percent per annum. If you invest for the full 179 days, you will earn Rs 13,575 in interest, resulting in a maturity amount of Rs 5,13,575.

For a fixed deposit of Rs 5 lakh with a tenure of 180 to 210 days, the interest rate is 6 percent per annum. Over 210 days, this FD will earn Rs 17,428 in interest, resulting in a maturity amount of Rs 5,17,428.

For a tenure of 211 days to just under 1 year, the interest rate is 6.25 percent per annum. Over the course of 1 year, the FD will generate Rs 31,728 in interest, bringing the maturity amount to Rs 5,31,728.

The highest available interest rate is for a tenure of 2 years to just under 3 years, remaining unchanged at 7 percent. Senior citizens receive the highest interest rate of 7.50 percent for this tenure, as well as for tenures of 5 years up to 10 years.

Madan Sabnavis, the chief economist at Bank of Baroda, mentioned that there isn’t a systematic liquidity issue. The rate revision reflects the bank’s specific asset liability management conditions and its strategy to sustain growth expectations. As of March 2024, SBI’s deposits grew by 11.13 percent year-over-year to Rs 49.16 trillion, and advances increased by 15.24 percent. The bank aims for a 12-13 percent growth in deposits and 14-16 percent growth in advances for 2024-25. Across the banking sector, credit offtake grew by 20.2 percent while deposits increased by 13.5 percent in FY24, with this momentum expected to continue, albeit at a moderated pace, into FY25 according to an SBI analyst presentation.

In an April 2024 post-monetary policy discussion, RBI Deputy Governor J Swaminathan noted that banks are actively mobilizing deposits due to a 3.0 to 3.5 percent gap between deposit and credit growth rates, which has been persistent for over a year. He also observed that customers are becoming more price-sensitive, leading to a significant shift towards term deposits and a decline in the proportion of current and savings accounts (CASA) as part of total deposits.

For SBI, the share of CASA in total deposits was 41.11 percent as of March 31, 2024, down from 43.8 percent a year earlier, although it had risen above 41.11 percent in December 2023. A Bank of Baroda official highlighted that most banks have a credit deposit ratio (C/D Ratio) near 80 percent, with strong credit demand expected to continue in the current financial year. This has prompted banks to increase resource mobilization efforts, even during the typically quiet first quarter.

RBI data showed the banking system’s C/D ratio was 79.5 percent in mid-April 2024, up from around 75.4 percent a year earlier. SBI’s C/D ratio was 68.34 percent at the end of FY24, up from 65.28 percent a year prior. While the bank has room to grow with current resources, it aims to be ready for increased credit demand for capital expenditure and retail needs, as noted by SBI officials.

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