There is a Hike in The Rates of Interest By HDFC on Fixed Deposits

HDFC Bank hikes interests : Reasons

One of the main reasons of HDFC Bank to hike interest rates for fixed deposits is to grow its deposits. It increased the rate of interest by 100 basis points that are by one percentage point. The bank is offering a return percentage of 7 percent following the increase. The 7 percent is on all maturities over a year.

Senior citizens are getting benefits to earn upto 7.5 percent. Bulk depositors can earn even more. Bulk depositors are those who deposits an amount of 1 crore or above.

Difference of HDFC Bank with other banking companies

If the deposit base is 7.9 lakh crore, then the HDFC Bank is having 7 percent of country’s deposit. HDFC Bank is having 7 percent as a marketshare.  Recently there was an increase in interest by SBI. It increased the rate of interest by 50 basis points. You can also expect other bank to hike the rate of interests for the fixed deposits.

The main reason is that the growth of deposit is not same as that of the expansion rate in credit. Reserve Bank of India also released a data. According to the data the deposits stood at Rs 115 lakh crore. The bank deposits were based on March 30, 2018. This is an increase of 6.7 percent. In the previous fiscal this increase was against the growth rate of 15.3 percent.

The advances bank grew 10.3 percent to Rs 87 lakh crore. It is higher than a percentage of 8.2 percent in the previous fiscal.

Different issue related to hiking interest rates for fixed deposit

If the deposit rates hikes, then it will result in lending of higher rates. This is because of the marginal cost lending rate as it is linked with the change in cost of funds. The transmission will be gradual as they are applied on renewals only.

HDFC Bank is providing their customer with such benefits. This will help them in increasing their profit amount when compared with other banks. There has been in an increase in currency in circulation which resulted in a decline of bank’s deposit. Because of all these stuffs, the surplus liquidity of banking system is vanishing. There is a pressure on interest rate. This is not because of the shrinking liquidity. Pressure on the interest rate is because the RBI will also increase rates for controlling inflation.

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