Dear raunak bhai,
SBI Hikes Deposit rates again,
Fresh round of deposit rate hike Signaling that pressure on liquidity could continue for some time, on December 7,2010, the State Bank of India (SBI) initiated a steep, unexpected 100bps increase in the relevant one-two year deposit bucket. At 8.5% for a 555 day deposit, the rate offered by the bank was higher than peers. In response, other banks also raised their rates. However, the hikes by the latter came in tandem with increase in lending rates, reflecting the pricing power wielded by banks and their consciousness towards margin protection.
However, in less than a month, resounding the liquidity pressure persisting in the system (a function of slow deposit growth), SBI raised its deposit rate again in the one-two year bucket by 50bps to 9%, a notch above peers. With the leader setting the tone, we expect others to follow. SBI’s rate hike was coupled with 40bps increase in the base rate and 25bps hike in PLR, reflecting the pricing power wielded by banks. Since the beginning of FY11, the banking system has seen a cumulative rise of ~190bps in deposit rates, 120bps in PLR, and 75bps in the base rate.
Will this affect the Banking sector ?
Please let us know your view on Banking sector.
TIA.
Best Regards,
JK
SBI Hikes Deposit rates again,
Fresh round of deposit rate hike Signaling that pressure on liquidity could continue for some time, on December 7,2010, the State Bank of India (SBI) initiated a steep, unexpected 100bps increase in the relevant one-two year deposit bucket. At 8.5% for a 555 day deposit, the rate offered by the bank was higher than peers. In response, other banks also raised their rates. However, the hikes by the latter came in tandem with increase in lending rates, reflecting the pricing power wielded by banks and their consciousness towards margin protection.
However, in less than a month, resounding the liquidity pressure persisting in the system (a function of slow deposit growth), SBI raised its deposit rate again in the one-two year bucket by 50bps to 9%, a notch above peers. With the leader setting the tone, we expect others to follow. SBI’s rate hike was coupled with 40bps increase in the base rate and 25bps hike in PLR, reflecting the pricing power wielded by banks. Since the beginning of FY11, the banking system has seen a cumulative rise of ~190bps in deposit rates, 120bps in PLR, and 75bps in the base rate.
Will this affect the Banking sector ?
Please let us know your view on Banking sector.
TIA.
Best Regards,
JK