Lenders Offer High Savings Rates In Wake Of Festival Season

New Delhi, Oct 17 (KNN) To attract more low-cost deposits, banks especially mid- and small-size private banks and small finance banks (SFBs) have introduced special rates on savings accounts as part of their festival season offers, reported BusinessLine.

Rates on fixed deposits (FDs) have been elevated for more than a year with SFBs offering up to 9.45-9.50%.

Recently, banks have been relying more on bulk deposits to boost their deposit base amid muted retail deposit accretion.

To encourage the latter, Bank of Baroda recently introduced four new types of savings accounts, and increased rates on retail term deposits of less than Rs 2 crore, including NRO and NRE deposits, by up to 50 bps.

It also raised rates on bulk deposits of different tenures by around 1%. This is nearly at par with and in some cases higher than 1-3-year term deposit rates of larger banks. A lot of these higher rates schemes are being introduced as a part of festival season offers for customers.

“As the rates are higher than term deposits, the pricing seems to be a bit irrational. The effective rate on savings deposits less than Rs 10 lakh is lower and hence in some way one can consider this as a marketing ploy,” Macquarie Research said in a note.

“The rates offered indicate the deposit mobilisation pressure faced by these banks to sustain good credit growth,” it said, adding that savings deposit growth is lagging total deposit growth by a wide margin of 600-700 bps at a system level. 

(KNN Bureau)