State Bank of India (SBI) has hiked term deposit rates by up to 20 basis points, in a move that is likely to be followed by other lenders. However, the country’s largest bank has also reduced saving bank deposit rates with balances of less than Rs 10 crore by five basis points to 2.70 per cent.

Both these revisions are with effect from today.

While the RBI has hiked the policy repo rate by 190 basis points in this year, the transmission to deposits has lagged that of lending rates.

This has come even as bank credit is growing at a strong 16.4 per cent.

However, the rise in deposits stands at 9.2 per cent. The relatively subdued transmission in deposit rates amid intermittent tight liquidity conditions has even caught the attention of some of the members of the monetary policy committee (MPC).

On Friday, minutes of their September meeting showed member Jayanth Varma saying that much of the policy rate action is yet to be transmitted to even the broader spectrum of interest rates. He added that less than a third of the increase in the repo rate during April-August has been transmitted to retail bank deposit rates.

This, however, could now change with the SBI setting the stage for deposit rate increases. SBI revised interest rates on domestic term deposits of less than Rs 2 crore across various maturities.

The increase is highest in the case of deposits in the maturity bucket of 3 years to less than 5 years, and 5 years and up to 10 years where they have been raised to 5.80 per cent and 5.85 per cent, respectively, from 5.60 per cent and 5.65 per cent, respectively

For deposits in the tenors of 1 year to less than 2 years, and 2 years to less than 3 years, they have been increased to 5.60 per cent (5.45 per cent) and 5.65 per cent (5.50 per cent), respectively — a rise of 15 basis points.