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    Default SBI hikes interest rate on select FDs

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    In a surprise move, countryís largest bank SBI on Saturday increased interest rates on select fixed deposits by 0.25 per cent.

    Deposits under Rs 15 lakh for a period of three years but less than five years will fetch an interest rate of 9 per cent, up from 8.75 per cent, State Bank of India (SBI) said in a statement issued here.

    The revised interest rate will be applicable from July 1, it said.

    The move, which is likely to trim SBIís profits, comes as a surprise because the bank had earlier this month cut deposit rates by 0.25 per cent in select maturities. This followed the Reserve Bankís cut in lending rates by 0.5 per cent in April and a cumulative cut in cash reserve requirements to the tune of 1.25 per cent this year.

    A hike in interest rate by SBI is surprising also because it followed a cut of 0.20 per cent in base rate by private lender HDFC Bank yesterday.

    Bankers are of the opinion that lowering lending rates, which can help boost sagging growth as well as credit pick-up, is possible only if they are able to rein in deposit rates which continue to be elevated due to competition and slowdown in deposit growth.
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