Amidst fierce competition to attract deposits, Bank of India (BOI), a public sector lender, has introduced a new retail term deposit option with a duration of 666 days, offering a 7.3 per cent annual interest rate. This move closely follows the State Bank of India's (SBI) decision to increase interest rates on retail term deposits by 25-75 basis points for deposits up to one year.
Simultaneously, BOI, headquartered in Mumbai, has reduced the interest rate on retail deposits maturing in two years from 7.25 per cent to 6.80 per cent, effective from 1 June 2024. BOI officials have confirmed that there are no alterations to the interest rates for other maturity periods.
Explaining the rationale behind introducing the new deposit option, bank officials stated that banks are actively seeking resources due to liquidity pressures and customers shifting their funds to avenues such as mutual funds, which offer higher returns. As most deposits with banks mature within two years, there is a crucial need to both retain existing funds and attract new funds across different deposit brackets. The revision in the two-year deposit category is aligned with this strategy, they added.
BOI's total deposits have witnessed a year-on-year increase of 10.21 per cent, reaching Rs 7.37 trillion by the end of March 2024. However, the share of retail deposits has marginally decreased from 45.66 per cent in March 2023 to 44.25% per cent in March 2024. Additionally, the proportion of low-cost deposits, including Current Account and Savings Accounts (CASA), has declined from 44.73 per cent in March 2023 to 43.21 per cent in March 2024.
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