A day after the grim announcement that inflation has spiralled up to 6.12%, two public sector banks have raised interest rates for fixed deposits.
MUMBAI: Good old deposit rates are coming back. A day after the grim announcement that inflation has spiralled up to 6.12%, two public sector banks have raised interest rates for fixed deposits.
State Bank of India has improvised a special deposit scheme to garner funds at interest rates as high as 9%. Meanwhile, the Punjab National Bank has also announced a quarter per cent hike, to 8.25%, for large deposits.
SBI’s new deposit product, SBI Platinum Account, will open from January 22. The interest on a deposit will be compounded quarterly, and the maximum tenure is three years. Since the interest accrued will be compounded quarterly, the effective rate of return will be higher: 9.31% per annum.
The announcement made by the two banks follows the increase in deposit rates by Centurion Bank of Punjab on Friday. ICICI Bank already has a scheme which offers 9%. However, it’s applicable only for deposits with a tenure of 890 days.
The move to raise deposit rates is bound to put pressure on lending rates as well. With higher interest rates being offered on deposits, the cost of borrowing funds has gone up. Hence, it’s natural that lending rates to borrowers, both retail as well as corporate, will inch higher.
SBI said that its “platinum” depositor will have the right to exercise ‘put options’. This means depositors can withdraw money at an interest rate of 8.25% per annum on expiry of one year and 8.50% on expiry of two years. And what’s more, there won’t be any penalty for premature withdrawal.
However, no interest will be paid if deposits are withdrawn before one year, SBI said in a statement to the stock exchanges.
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