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25-75 basis points deposit rate hikes by SBI

The State Bank of India has hiked the interest rates on fixed deposits by 0.25 to 0.75 per cent age points for retail deposits up to one year. The rate increase, effective May 15, is meant to attract deposits and meet credit demand.

With rates expected to soften later in Financial Year 2024-25, the hike for the retail category (deposits of below Rs 2 crore) is restricted to short-term deposits only. Rates have not been hiked for long- and medium-term deposits.

In retail term deposits, the revised rate is 5.5 per cent, up from 4.75 per cent, for the 46-179 days’ maturity bracket. The new rate for the 180-210 days’ bracket is 6 per cent as against 5.75 per cent. In the 211 days to less than one-year bracket it is 6.25 per cent as against 6 per cent earlier.

Retail investors should shop around for the best fixed deposit rates. They should also keep safety in mind. It is prudent not to allocate a large portion of one’s fixed deposit portfolio to cooperative banks. Even allocation to small finance banks should not exceed 25-30 per cent of the total fixed deposit corpus.

Think carefully before you go for a tenure of more than three years. If you have a horizon of three to five years, it may be beneficial to invest in a hybrid mutual fund. And if you have a horizon of more than five years, go for a pure equity fund.

First Published: May 17 2024 | 8:29 AM IST