Hike rates

HDFC and Bajaj Finance raise rates on long-term deposits ahead of RBI meeting

In a move that could provide savers some breathing space, two of the largest non-bank lenders, HDFC Ltd and Bajaj Finance, have raised their long-term deposit rates ahead of the Reserve Bank of India’s monetary policy meeting (RBI ), as a sign that the rate cycle may be turning.

India’s largest mortgage lender HDFC Ltd has raised long-term rates by up to 15 basis points (bps). It now offers an annual return of 6.25% on a 33 month deposit of up to Rs 2 crore. Likewise, a deposit of Rs 2 crore will yield an annual return of 6.7% for a period of 66 months and 6.8% for a period of 99 months. These rates come into effect immediately, that is, on December 1. Seniors (60 and over) will be entitled to an additional 0.25 percent per annum on deposits up to Rs 2 crore, other than recurring deposits.

On the other hand, Bajaj Finance, the largest consumer financier in India, increased interest rates by up to 30 basis points on long-term deposits for a period of 24 to 35 months and 36 to 60 months. There is no change in the annual returns for the 12-23 month period. According to the revised statements, the consumer financier offers 6.4% on a deposit of up to Rs 5 crore for a period of 24 to 35 months and 6.8% for a period of 36 to 60 months.

With benchmark rates at their lowest level due to the coronavirus pandemic (Covid-19), savers have had to bear the brunt of their low deposit returns to the point where many have switched from term deposits to investing in systematic investment plans of mutual funds and guaranteed return products of insurance companies.

RBI’s repo rate currently stands at 4%. With the end of ultra-accommodative monetary policy, the rate cycle could turn sooner rather than later and that would mean the cost of borrowing for many would rise.

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