SFBs offer 75-100 bps higher FD rates than PSBs, Private Banks. More Growth Ahead?

“With liquidity tightening and credit demand remaining strong, lending institutions are in a rush to grab maximum deposits that small finance banks are offering,” Cyril Charlie, Research Analyst, Geojit Financial Services, said on Thursday. fixed deposit rates which are 75-100 basis points higher than those offered by public sector banks (public sector banks) and private banks.”

This has helped small finance banks grow deposits at three times the speed of commercial banks, Charlie said, “albeit because of a lower base.”

In the May 2022 to February 2023 policy, the RBI hiked the repo rate by 250 bps, taking it to 6.5%. It was in the April 2023 policy that the RBI took a tactical pause in rate hikes, however, maintaining its accommodative policy stance. In these periods, both lending and deposit interest rates in banks have increased.

In the minutes of the MPC meeting for April 2023 policy, the RBI hinted at the possibility of further rate hikes. Governor Shaktikanta Das Said, it is strategic and not a pivot or a change in policy direction. He believes that the fight against inflation is not over yet.

If rate hikes are stored in the upcoming policies, both lending and deposit rates of banks will also be pushed up.

Another reason for a higher hike in FD rates would be the fact that credit growth has outpaced deposits.

According to RBI data, the credit growth of banks stood at 15.7% in FY23, while the total deposit growth stood at 10.2%.

“Despite the temporary moratorium on rate hike by RBI, it is expected that there will be further revision in fixed deposit rates as credit demand is predicted to outpace deposit growth,” said analyst at Geojit.

Check out the latest FD rates here:

Latest FD Rates of SFB:

Let us look at the FD rates of listed SFBs such as AU Small Finance Bank, Ujjivan Small Finance Bank, Equitas Small Finance Bank and Suryoday Small Finance Bank.

Equitas SFB is the latest to hike interest rates on FDs with effect from April 11, 2023. The bank is offering 3.5% to 8.50% for general category. To senior citizens, the bank gives an additional 0.5% and hence the highest rate for them is up to 9%.

Currently, AU SFB offers interest rates in the range of 3.75% to 8% on the below mentioned FDs for general category. 2 crores. For senior citizens, the rates vary from a minimum of 4.25% to a maximum of 8.50%.

Meanwhile, Ujjivan SFB offers FD rates ranging from 3.75% to 8.25% for the general category. For senior citizens, the bank offers an additional 0.50% over normal rates and hence the highest interest rate comes to around 8.75%.

Last month, Suryoday SFB hiked its FD rates by a whopping 5 to 200 basis points. Currently, this SFB is offering an interest rate of 4% to 8.51% to the general category, while senior citizens can earn from 4.50% to 8.76%.

FD Rates of Public Sector Banks (PSBs):

For the general public, SBI currently offers 3% to 7%. While the elders here earn between 3.5% to 7.50%. Under its special FD scheme for 400 days (Amrit Kalash), SBI gives 7.10% to general citizens and 7.60% to senior citizens.

Another leading PSB, Punjab National Bank is offering FD rates below 3.50% to 7.25% The general class gets two crore senior citizens from 4% to 7.75%.

Similarly, Bank of Baroda offers a discount of 3% to 6.75% to the general category, while senior citizens get 3.5% to 7.25%. Under its Baroda Tiranga Plus deposit scheme with a tenure of 399 days, the bank gives 7.05% to general category and 7.55% to senior citizens.

FD Rates of Private Banks:

The largest private sector bank, HDFC Bank is offering its general customers on FDs ranging from 3% to 7.10% below 2 crores. The interest rate is higher for senior citizens as they earn in the range of 3.5% to 7.75%.

Notably, another leading private lender, ICICI Bank, offers FD rates similar to HDFC Bank. ICICI Bank gives 3% to 7.10% to general customers and 3.5% to 7.60% to senior citizens.

Unlike the other two private lenders, Kotak Mahindra Bank offers FD rates ranging from 2.75% to 7.20% for general customers and 3.25% to 7.70% for senior citizens.

Generally, be it SFBs, PSBs or private banks, the minimum tenure on FDs is 7 days to maximum 10 years. FD interest rates and tenure vary from bank to bank.