HDFC Bank today became the first lender to increase its fixed deposit rates by up to 75 basis points after RBI raised key short-term rates. With deposit rates going up,the bank may also raise lending rates in the next few weeks,a bank official said. The revised fixed deposit rates would be effective from July 30. When contacted,HDFC Bank Executive Director Paresh Sukthankar said,"We have decided to raise deposit rates across various tenor between 25-75 basis points." The rate hike was logical as the banking system is expected to remain in marginally deficit situation coupled with expected strong credit growth in the coming days,he said. The economy is expected to grow at 8.5 per cent in 2010-11 as per the RBI projection and going forward loan growth would pick up,he added. Giving details of increase in deposit rates,Sukthankar said that term deposit rate with maturity in between 91 days and 6 months would be raised by 75 basis points to 5.25 per cent from the existing 4.5 per cent. For fixed deposit in between 9 months and one year,the new rates would be higher by 50 basis points at 6.25 per cent while for 1 year 16 days category it will be 7 per cent,25 basis points more than the existing rate of 6.75 per cent. Asked if it would translate into higher lending rate,he said,"It would not immediate,but as we move along short term lending rates would go up. I do expect the lending rates would reflect this in the next few weeks." However,it would not mean change in the base rate which was fixed in beginning of this month,he said. RBI yesterday raised its short-term lending and borrowing rates by 0.25 per cent and 0.50 per cent respectively to bring inflation down to six per cent by March 2011 from double digits now. The short-term lending rate (repo) was increased to 5.75 per cent while short-term borrowing rate (reverse repo) rose to 4.50 per cent. Another private sector lender Lakshmi Vilas Bank also increased its fixed deposit rates up to 50 basis points across various maturities. The new rates would be effective from August 2. The term deposit rate for 181-270 days has been raised by 50 basis points to 6.25 per cent from 5.75 per cent. At the same time,271-364 days term deposit would attract an interest rate of 6.5 per cent compared to existing 6.25 per cent while 1 year to less than 2 years deposit would also go up by 25 basis points.
