Banks are forced to offer inflation-beating real interest rates on fixed deposits.
State-run banks are offering higher deposit rates, with the highest rate being offered by Punjab & Sind Bank at 8-8.50 per cent.
These inflation-beating deposit rates are for a tenor ranging from 200 to 800 days as credit growth has been far outpacing deposit mobilization throughout this fiscal, leading to a funding crunch.
Even at the lowest 7 per cent, fixed deposit pricing is positive for customers because even after a surprise spurt in retail inflation for January at 6.52 per cent, the real rates are in the green.
The high rate offering also comes as banks have almost fully passed on the 250-bps hike in RBI rate since May last year to their borrowers, they've not been doing so for deposits, leading to a funding gap and forcing them to borrow from the market.
The nation's largest lender State Bank of India, is offering 7.10 per cent for the general public and a higher 7.60 per cent to senior citizens on an annualised basis for fixed deposits in the 400 days bucket.
On the other hand, the largest private sector lender HDFC Bank offers only 7 per cent to the general public and 7.50 per cent to senior citizen depositors for five years, while its immediate peer ICICI Bank gives 7 per cent for more than 15 months to retail and 7.5 per cent to senior citizens for over 15 months.