Commercial Banks Hike Deposit Rates and Lending Benchmarks Following RBI Repo Rate Increase to 5.5%

Commercial banks across India have begun raising interest rates on select fixed deposit (FD) tenures and benchmark lending rates following the Reserve Bank of India's (RBI) decision to raise the policy repo rate by 25 basis points to 5.50 per cent in October. The rate action, which coincided with the central bank shifting its policy stance to "calibrated tightening," has gradually filtered through to institutional funding costs and deposit mobilization strategies.

While external benchmark-linked lending rates (EBLR) and repo-linked lending rates (RLLR) saw immediate upward revisions of 25 basis points following the Monetary Policy Committee's announcement, banks had initially paced deposit rate hikes. However, tightening banking system liquidity—which dropped to an average of ₹1.28 lakh crore in late October and early November from ₹7.77 lakh crore in September—combined with sustained credit growth has accelerated the upward repricing of retail deposits.

Key Deposit Rate Adjustments Across Lenders:

• Bank of Baroda: Raised interest rates on its 555-day special deposit scheme to 7.50 per cent.
• Federal Bank: Boosted the senior citizen deposit add-on spread to 0.60 per cent, taking peak returns to 7.50 per cent.
• HDFC Bank: Revised select term deposit rates upward by up to 50 basis points, taking peak general customer rates to 6.60 per cent and offering senior citizens up to 7.20 per cent.
• Canara Bank: Increased fixed deposit rates by up to 15 basis points on selected buckets, pricing its 555-day special deposit at 6.75 per cent for regular depositors and 7.25 per cent for senior citizens.
• Punjab National Bank (PNB): Adjusted domestic term deposits, offering up to 6.60 per cent for general customers and 7.10 per cent for senior citizens on its 444-day tenure.
• Small Finance Banks: Select small finance banks lifted peak interest rates for senior citizen depositors up to 8.60 per cent.

Lending Rates Trend Higher on MCLR Hikes

On the borrowing side, banks are passing on rising funding costs through upward revisions in their Marginal Cost of Funds-Based Lending Rates (MCLR). Lenders including State Bank of India (SBI), HDFC Bank, Punjab National Bank, Bank of India, Indian Bank, Canara Bank, and Bank of Baroda have adjusted their MCLR across various tenures by 5 to 20 basis points.

SBI increased its MCLR by 15 basis points across the three-month to three-year tenures, while HDFC Bank revised its benchmark by 5 to 15 basis points. PNB also effected a 10-basis-point hike across all six of its MCLR maturities.

The revisions in MCLR benchmarks mean that legacy floating-rate corporate borrowings, home loans, and auto loans tied to internal bank benchmarks will experience higher equated monthly installments (EMIs) or extended tenures as their annual reset dates arrive. With retail inflation reaching 6.09 per cent in October—surpassing the RBI's upper tolerance threshold—market participants anticipate that borrowing costs and yields on deposits could face further upward pressure in upcoming policy meetings.