Banks have begun raising deposit rates after the Reserve Bank of India (RBI) hiked

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key policy rates on Tuesday.

HDFC Bank, India's second largest private sector lender, became the first bank to revise interest rates on deposits by 25-75 basis points with effect from July 31.

State Bank of India (SBI), the country's largest bank, may also raise rates in the near term but it is yet to take a decision on the timing of the deposit rate revision.

Central Bank has also raised deposit rates, while Corporation Bank, another public sector lender, raised rates a day before RBI hiked interest rates.

A senior SBI official told Financial Chronicle that the bank’s asset-liability committee is scheduled to meet on Thursday. “But we are unlikely to take a call on deposit rates. It may be a while before we realign our rates,” the official said.

“The bank may hike rates by at least 25 basis points by August or September,” OP Bhatt, chairman and managing director of SBI, was quoted by PTI.

Resource mobilisation will be the top priority for most banks if liquidity is tight.

“We realigned our deposit costs as resource mobilisation will be top on most banks’ priority. For deposits of up to six months, the increase is 75 basis points, and for one-year deposits, the hike is 25 basis points to 7 per cent. On lending rates we are yet to take a call but it may not be immediate,” said a senior HDFC Bank official.

Central Bank on Wednesday raised deposit rates to become the first public sector bank to do so. They hiked 25-50 basis points for various maturities, with the sharpest increase of 50 basis points for 46-90 day deposits.

Corporation Bank effected a 25 basis points increase in its 1,000-day deposit rate on Monday, a day before RBI hiked interest rates. The bank began deposit mobilisation before the policy announcement by the central bank. It has a special 1,000-day deposit scheme that had an interest rate of 7.25 per cent, which got revised to 7.5 per cent.

“We raised the rates on this bucket of deposit before the credit policy announcement. Our asset-liability committee is meeting on Friday, so we will take a call on other tenures as well. Deposit rates will definitely go up immediately, but lending rates will not rise until the next quarter,” said JM Garg, chairman and managing director of Corporation Bank.

SBI was toying with the idea of revising its deposit rates but was waiting to see RBI’s moves in its first quarter monetary policy review.

SBI’s one-year deposit rate is at 6 per cent, about 0.5 percentage point below the rate at which other banks take deposits. “So there is a strong case for SBI to reach the level of other banks,” said a senior SBI official.

Lakshmi Vilas Bank, a private sector lender, also raised its term deposit rate for 181-270 days by 50 basis points to 6.25 per cent. For deposits of 271-364 days, the rate has been raised to 6.50 per cent from 6.25 per cent. For periods ranging from one year to less than two years, the rate has been raised to 7.50 per cent from 7.25 per cent.