As a result of hike in the cash reserve ratio by the RBI, the country's largest private sector lender, ICICI Bank has increased deposit rates by up to 50 bps on select maturities with immediate effect.
With this, the bank will now provide 6.75 % interest in 390 days deposit as well as on 590 day deposit, an increase by 25 basis points in the former and 50 basis points in the latter.
The hike in the bank's deposits has come shortly after HDFC Bank's declaration of a similar hike by about 150 bps on selected deposits.
IDBI Bank has been the first to increase its deposit rates by 25 bps earlier this month. Also Union Bank of India has hiked its deposit rates by 25-50 bps on maturities tenoring 1-5 years.
This sudden decision by banks to hike deposit rates is considered to be a means to attract customers to deposit their money with these banks.
However analysts suggest that as liquidity is still comfortable and credit off take has not gained pace, all banks are not in hurry to go for deposit rate hike.
Supporting this school of thoughts is the largest lender of the country, State Bank of India. The Bank has declared that its deposit rates will not increase till May -June.
Those banks which have increased their rates may be apprehending that despite sufficient liquidity the cash may soon dry up owing to policy tightening measures adopted by RBI.