ICICI Bank, BOI, HDFC Bank, Yes Bank, Others Hike FD Rates Ahead Of RBI Policy

Ahead of the Reserve Bank of India's (RBI) impending Monetary Policy Committee (MPC) announcement on December 8, 2023, several leading banks, including ICICI Bank, HDFC Bank, Bank of India, Federal Bank, and Yes Bank, have recently hiked their fixed deposit (FD) interest rates. This development signals a response to the delayed transmission of RBI's policy rate hikes, prompting banks to align their FD rates with potential future policy adjustments.

ICICI Bank Restructures FD Rates for Deposits

ICICI Bank has restructured its FD interest rates for deposits ranging from Rs 2 crore to Rs 5 crore, effective December 6, 2023. The revised rates start at a minimum of 4.75% for tenures between 7 to 14 days and go up to 7.25% for a period extending from 390 days to 15 months.

Bank of India Restructures FD Rates for Deposits

Bank of India has followed suit by increasing its FD rates, primarily targeting deposits from Rs 2 crore and above to less than Rs 10 crore. This revision, effective December 1, 2023, ranges from 5.25% for a tenure between 46 to 90 days to a substantial 7.25% for a tenure of 1 year.

HDFC Bank Restructures FD Rates for Deposits

HDFC Bank has adjusted its FD rates for non-withdrawable fixed deposits. The bank is offering returns of up to 7.45% for tenures spanning one to two years and 7.2% for durations extending from two to ten years. Non-withdrawable fixed deposits lack a premature withdrawal facility, ensuring depositors cannot close them before the designated term.

Federal Bank Restructures FD Rates for Deposits

Federal Bank has also re-evaluated its deposit rates, offering a substantial 7.50% for a 500-day tenure for both resident and non-resident deposits. Senior citizens, in particular, stand to benefit with an attractive rate of 8.15%. The interest rates on Foreign Currency Non-Resident Account (FCNR) and Resident Foreign Currency (RFC) have also seen an increase.

The recent surge in fixed deposit rates by these banks can be linked to the delayed transmission of RBI's policy rate hikes. The RBI's benchmark policy rate (repo) has remained unchanged at 6.5% since February 2023, despite earlier implementing six consecutive rate hikes totalling 250 basis points until the pause in April.

While repo rates have risen, the adjustment in bank deposit rates has been gradual, according to RBI governor Shaktikanta Das. Banks initially lagged in increasing their FD rates following the RBI's policy actions, leading to a catch-up phase. This trend indicates that banks are now aligning their FD rates with the policy rate hikes, responding to the potential for further rate hikes by the RBI.

Depositors may continue witnessing adjustments in FD rates as banks aim to bridge the gap between policy actions and their interest rate policies, experts say. As the RBI gears up for its MPC announcement on December 8, all eyes will be on whether the central bank decides to maintain the repo rate or make further adjustments.