Share of term deposits offering 7% plus interest rate jumps to 64.4% of banks’ total TDs

The share of term deposits (TDs) offering 7 per cent and above interest rate has jumped to 64.4 per cent of banks’ total TDs as at March-end 2024, against 33.7 per cent as at March-end 2023.

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A drill down of RBI data show that as at March-end 2024, 58.9 per cent of the term deposits (TDs) of banks’ carried interest rate between 7 per cent and 8 per cent (against 30.3 per cent of TDs as at March-end 2023) and 5.5 per cent of the TDs carried interest rate above 8 per cent (against 3.4 per cent of TDs as at March-end 2023).

Rates offered

For example, the highest interest rate that State Bank of India (country’s largest bank) is currently offering is 7 per cent on a TD of “2 years to less than 3 years” duration.

The highest interest rate that HDFC Bank (largest private sector bank) is currently offering is 7.25 per cent on a TD of “18 months to less than 21 months” duration.

The highest interest rate that AU Small Finance Bank (largest small finance bank/SFB) is currently offering is 8 per cent on a TD of “18 months” duration.

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Small finance banks such as Ujjivan and Suryoday are offering 8 per cent plus interest rate on certain maturity buckets.

The highest interest rate that Ujjivan SFB and Suryoday SFB are currently offering is 8.50 per cent (on a TD of “15 months” duration) and 8.65 per cent (on a TD of “2 years & 2 days” duration)

Deposit mobilisation

Banks are finding deposit mobilisation challenging as other investment avenues such as equities, mutual funds and non-convertible debentures are fetching relatively higher returns. This comes even as credit growth is outpacing deposit growth.

Bank credit and deposits registered a year-on-year growth of 19.3 per cent and 13.5 per cent, respectively, as at March-end 2024.

CARE Ratings, in a report, said banks are expected to make further efforts in FY25 to shore up their liability franchise and ensure that lagging deposit growth does not constrain credit offtake.

In his latest bi-monthly monetary policy statement, RBI Governor Shaktikanta Das said, “The persisting gap between credit and deposit growth rates warrants a rethink by the Boards of banks to re-strategise their business plans. A prudent balance between assets and liabilities has to be maintained.”