Your fixed deposit just turned more attractive: banks have launched special-term deposit schemes in the 1-2 year maturity period.
Bank of Baroda, Union Bank of India, IDBI Bank, and Central Bank of India, Development Credit Bank recently launched fixed deposit schemes maturing in 1-2 years with interest rates in the range of 8% to 8.6%.
Deposits in these tenures were previously earning 7% to 7.5% interest.
Liquidity tightness in the system and also pressure from the Reserve Bank of India has led to the introduction of these schemes. “These schemes will help banks to mobilise low cost fund and fill the asset liability mismatch,” says S Muhnot, executive director, IDBI Bank.
Banks prefer mobilising fund from retail investors as they are low-cost compared to bulk deposits. “Reserve Bank of India recently asked banks to offer higher rates to depositors to attract more people, which has led to the introduction of these schemes,” said a senior official of a public sector bank.