State Bank of India, the country's largest lender, has also announced a hike in its interest rates for foreign currency non-resident (FCNR) deposits and non-resident external (NRE) term deposits.
The bank revised its rate on FCNR deposits in US dollar from 50 to100 basis points across various tenures. The deposit rates with 1-2 years of maturity have been increased to 2.96% form 2.46%.
The rates for deposits having 2 to 3 years, 3 to 4 years and 4 to 5 years tenures have been hiked by 50 basis points each. A deposit with 2 to 3 years of tenure raised the rates to 3.06% form 2.56% and the rates for deposits having maturity tenures of 3 to 4 years and 4 to 5 years are increased to 3.38 % and 3.60% respectively. The rates for deposits in euro for 1 to 2 years of maturity will go up to 5.08% from 4.58% and for British pound to 5.77% from 5.27% for the same period.
Similarly, interest rate for NRE deposits has gone up by 0.5% across various maturities. NRE deposits with 2 to 3 years of tenure have been raised to 3.81% from 3.31% whereas deposits with a maturity of 3 to 5 years have reached to 4.13% from 3.63%.
These rates were effective from Thursday.
Banks, which have hiked these rates, include market major State Bank of India, Punjab National Bank, Bank of Baroda and Union Bank of India.
Punjab National Bank (PNB) has raised the interest rates by 50 basis points for non-resident deposits in foreign currencies including US dollar, Euro and British Pound. The bank also raised interest rates by 50 basis points for rupee deposits by non-residents, effective from Wednesday.
Banks have taken this move after the Reserve Bank of India (RBI) lifted the ceiling on rates by 50 basis points to attract more dollars into the country. However, many bankers feel that a hike of 50 basis points may not be enough to draw non-residents who are likely to turn risk-averse.
A senior SBI official said, "The question is whether this hike is adequate to attract more deposits."
Raising interest on NRI deposits was part of the measures announced by RBI to support the rupee, which threatened to fall below a substantial mark against the dollar in the wake of the US financial crisis.