ICICI Bank raised interest rates on some fixed deposits on Friday effective August 19. The move is consistent with the industry trend of banks are increasing rates in order to attract more deposits to support credit growth.
ICICI Bank has set the rates on retail fixed deposits ranging from one year to five years between 5.50% and 6.10%, with rates on one-year deposit being 5.50%. The bank will offer an interest rate of 6.05% on bulk deposits of one-year tenure.
While banks’ credit growth stood at 12-15% in June and July, deposit growth is lagging the credit growth. As of fortnight ended July 29, deposits increased by 9.1% YoY to Rs 169.7 trillion, according to RBI data.
Banks are increasing issuances of certificate of deposits (CD) to support credit offtake, with outstanding CD issuances amounting to Rs 2.5 trillion in the fortnight ended July 29, the RBI said in the August bulletin.
The transmission of policy rate hikes is higher for lending rates compared to retail term deposit rates, the RBI observed, adding that since the liquidity in the system has started normalising, banks have started aggressively raising their bulk deposit rates.