India's second largest private sector lender, HDFC Bank has increased its fixed deposit rates in the range of 50-100 basis points. The hike in deposit rates was announced by the bank on Friday, 19th February, 2010.
The bank is second in number in hiking deposit rates after IDBI Bank, post credit policy review.
As a reason for the same Ashish Parthasarthy, head, treasurer, HDFC Bank said, "We want to bring our deposit rates in line with other market participants (both public sector and private sector banks), which are currently offering higher rates 7-7.75% above 3 years."
The bank has increased rates for fixed deposits with maturity period ranging from 3-10 years from 6 % to 7.5 %, an increase by 50 basis points.
Short term deposit rates having maturity period ranging between 2- 3 years have been increased from 6% to 7 %, an increase by 100 basis points.
The bank has also declared an increase in the rates of deposits having a tenor between 366 days to 2 years from 6 % to 6.5%. An exception has been made by the bank in the case that with deposits maturing in 1 year 16 days, the rate of interest will be 6.75 %.
With respect to the enquiry about rise in lending rates, Mr. Ashish Parthasarthy said, "lending rates may be hiked in the second half of the current calendar year across the industry. At the same time, we expect 25-50 basis points hike in repo and reverse repo by RBI in April." He also added that rise in lending rates will depend on the interest rate scenario and economic situation prevailing in the country.
The increase in deposit rates by banks can be said to be a resultant of the increase in cash reserve ratio by RBI by 75 basis points.