Bajaj Lending, a non-banking finance company, has increased deposit rates for the third time in as many months to protect against liabilities as the sector competes for capital in a level that hasn't been seen in almost a decade. In accordance with the changing macroeconomic trend, Ujjivan Small Finance Bank has also increased the deposit rate on several buckets.
The competition for deposits could intensify due to decreasing liquidity and rising credit demand.
"It's a deposit war," a private sector bank chief executive said recently.
Since April, when the Reserve Bank of India began raising interest rates to control inflation, a number of lenders, including State Bank of India and HDFC, have increased deposit rates repeatedly.
With effect from November 22, Bajaj Finance, the lending division of Bajaj Finserv, increased fixed deposit rates by up to 25 basis points for tenures ranging from 12 to 23 months. To entice savers, it has even added a 39-month tenure.
Depositors may receive up to 7.7% per year for a 44-month period, while seniors 60 and above may receive 7.95% per year in interest.
For regular depositors, Ujjivan said its highest interest rate would be 8% for 80 weeks (560 days), while seniors would receive 8.75% for the same term.
Deposit growth persisted in the single digits despite fierce rivalry for deposit mobilization, while bank credit offtake is increasing at a rate in the high teens. According to RBI data as of November 4, bank loans surged at a 17% rate, driven by both increased demand for working capital in an inflation-heavy market and deposits growing 8.2% year over year.
As of November 4, the weighted average call rate for short-term rates had jumped to 5.98% from 3.34%, signalling tighter interbank liquidity as a result of the central bank withdrawing the excess funds that had been injected during the pandemic to stimulate the economy.
"Deposits rates are expected to go up even further due to elevated credit offtake, widening credit deposit gap, festival season, lower liquidity in the market, and inflation," Care Ratings said earlier in the month.