State Bank of India hikes deposit rates up to 150 basis points

MUMBAI - India’s largest lender, the government-run State Bank of India (SBI) Monday hiked its deposit rates by up to 150 basis points, in a move that should encourage deployment of domestic savings in the commercial banking system.

The announcement comes soon after Reserve Bank of India Governor Duvvuri Subbarao told banks to raise their deposit rates and bring down their lending rates.

All changes are effective Dec 7, SBI said in a statement to the bourses.

The governor said Indian banks have done well in bringing more people into the banking network, providing them avenues to secure their financial future but much more needs to be done.

“The net interest margin of the Indian banking system is higher than that in some of the other emerging market economies even after accounting for mandated social sector obligations such as priority sector lending and credit support for the government’s anti-poverty initiatives,” Subbarao had told a banking conclave.

As per the revision applicable on deposits below Rs.1 crore, the interest rates have been raised for deposits up to 1 years from 6 percent to 7.25 percent, while for those having a tenor of 3-5 years, the interest rate has gone up from 7.25 percent to 8.25 percent.

SBI’s decision to increase deposit rates also comes after the country’s largest private lender ICICI Bank raised its lending as well as deposit rates by up to 50 basis points effective Dec 6.