SBI on Tuesday increased rates on its bulk deposits to match up with other retail deposits and this is likely to be followed by other banks too given the liquidity conditions as well as expectations of loan demand picking up in near future. The state-run lender for the second time in two months increased rates on deposits over Rs. 1 crore by 50-140 basis points. Previously the hike was effected in November 2017.

The effective rates on both the retail and bulk deposits fall between 5.25% and 6.25%.

A PTI report also suggest that with the recent offtake in credit demand; credit deposit ratio has increased and banks are likely to raise interest rates on deposits in the near term.

Other reason owed to a likely rate hike on deposits is systemic liquidity deficit mainly on account of lower government spending as well as tax outflows. The deficit in the current regime stands at Rs. 15000 crore.

Nonetheless, customers and investors can expect only gradual increase in deposit rates which have for few years have narrowed down substantially. Also, the hike shall be dependent on each of the banks' credit offtake.

ICRA also hinted at incremental credit push which shall hence call the need for more mobilization of deposits and hence there is a chance of rate hike across deposits.

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