In a boost to small investors, a few banks and NBFCs have in recent weeks announced hike in interest rates for certain tenures.

Ujjivan Small Finance Bank recently raised interest rates on term deposits. For general citizens, the bank has hiked the interest rate on term deposits with a tenure of 19 months and one day to 24 months to 6.6 per cent, and for 12 months tenure, it has hiked the interest rates rise to 6.5 per cent. The interest rate was earlier 6 per cent.

The bank has also announced an additional 75 basis points for senior citizens across all tenures.

‘To mobilise deposits’

“The move is aimed at mobilising deposits among existing and new customers,” it said, adding that the new interest rates are applicable on fixed deposits of up to ₹2 crore.

Similarly, Bajaj Finance had on December 1 announced an increase in fixed deposit rates by 0.30 per cent for tenors between 24 and 60 months on fixed deposits of up to ₹5 crore.

HDFC Bank too has increased fixed deposit rates for select tenors with effect from December 1.

Not necessarily an industry-wide trend

However, experts said it is too early to be considered as an industry-wide trend. “The increase in deposit rates is not being done universally and is just for certain maturities. It is bank and NBFC specific and could possibly be to garner more deposits to ensure assets and liabilities remain balanced. In general banks have surplus deposits. So, these hikes, should not be interpreted as a starting point of an increasing interest rate cycle. But it is good for small savers,” said Madan Sabnavis, Chief Economist, CARE Ratings.

Also read: Deposit growth in alternative fortnights a contrarian trend: SBI Ecowrap

The Reserve Bank of India has maintained the status quo on key rates in the bi-monthly Monetary Policy announced on December 8. A rate hike is expected sometime next year, according to experts.

“A rate hike by the Reserve Bank of India is expected and may happen next year. Debt funds returns continue to remain low and banks seem to have an advantage at present. Even a 0.5 per cent to 1 per cent hike in interest rates matters a lot to many investors who depend on interest from term deposits as a source of income. However, it is to be seen whether other banks and NBFCs also choose to hike rates,” said Harshad Chetanwala, co-founder, MyWealthGrow.com.

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