Fixed deposit rates to remain stable, may drop in July

It’s time you made that bank fixed deposit (FD). FD rates are high now, but are likely to fall around or after June-July when inflation is expected to come under control.

“Till June-July, we will not cut retail FD rates because inflation may continue to be high so retail depositors will have to be given some incentive so that they put their money in bank FDs,” said BA Prabhakar, executive director, Bank of India.  “Bulk deposit rates may come down in April. But we will not slash retail FD rates at least till June-July,” added RK Bansal, executive director, IDBI Bank.

Typically, bulk deposits are for amounts over Rs1 crore, while retail deposits are for much lesser amounts.

Effective Monday, HDFC Bank has raised retail FD rates by 25-100 basis points across various short-term and medium-term maturities.

This is the second time the bank has hiked retail FD rates in the current quarter. The last hike had seen retail FD rates go up by 25-125 basis points. Even the State Bank of India and ICICI Bank have hiked retail FD rates twice this quarter.

Analysts feel the banks will resort to one last hike of 25 basis points before the financial year ends to achieve the deposit growth target of 18% for FY11. However, it is expected to be the last hike even if the RBI keeps raising key policy rates further.