RBI repo rate hike: Will SBI, other banks increase fixed deposit rates? Here's what SBI chairman said

Speaking to reporters on Thursday, a day after the RBI’s policy announcement, Setty said banks currently have sufficient liquidity, reducing the immediate need to offer higher rates to attract deposits.

Will SBI and other banks increase FD rates after the RBI repo rate hike?

Not immediately, going by Setty’s assessment. An increase in the RBI’s repo rate does not automatically translate into higher FD rates, as banks also consider their liquidity position, credit demand and cost of raising deposits before revising rates.

The RBI’s latest policy decision has raised questions about whether banks will offer better returns to depositors. However, SBI’s comments suggest that surplus liquidity could delay any immediate increase in deposit rates.

For FD investors, this means higher returns are not guaranteed in the near term. Individual banks may take different decisions depending on their funding requirements and competitive position.

RBI rate hike may improve banks’ net interest margins While depositors may have to wait for better FD returns, banks could benefit from the RBI’s rate action through improved net interest margins (NIMs).

Setty said the central bank’s shift towards tighter monetary policy could support banks’ NIMs over the next two to three quarters.

Asked whether the RBI’s rate hike and SBI’s expectation of further increases would help margins, Setty responded positively, while declining to share specific projections ahead of the bank’s earnings announcement.

He added that more than 50% of loans in the banking system are linked to external benchmark-based lending rates, which are repriced in line with RBI policy changes.

What should FD investors do now?

For investors whose FDs are maturing soon, the immediate priority should be to compare the rates offered by different banks rather than assume that the repo rate hike will lead to an instant increase in deposit returns.

For now, his comments point to a wait-and-watch approach: surplus liquidity may keep deposit rates stable in the coming months, but stronger credit demand could eventually prompt some banks to offer higher rates.