Banks Boost FD Rates to Attract Depositors Amid Liquidity Shortages

To tackle liquidity challenges, IDBI Bank and Bank of Baroda have raised FD rates, introducing special schemes like higher rates for senior citizens and flexible withdrawal options in liquid FDs.

What Is Causing the Liquidity Crunch?

Recently there has been a strain on rupee liquidity in India, driven by companies settling their tax obligations and investors borrowing funds to purchase stocks, the demand for the local currency has surged.

In response to ongoing liquidity challenges, banks are revising their fixed deposit (FD) offerings to attract customers and boost deposit growth. IDBI Bank and Bank of Baroda have both introduced enhanced FD rates, targeting specific customer segments and offering more flexible terms.

IDBI’s Special FD Scheme for Senior Citizens

IDBI Bank has recently rolled out the IDBI Chiranjeevi-Super Senior Citizen FD scheme, tailored for individuals aged 80 and above. This product provides higher interest rates, offering an additional 65 basis points (bps) over the standard FD rates and 15 bps more than the regular senior citizen rates.

Some of the interest rates include 8.05% for a 555-day tenure, 7.9% for 375 days, 8% for 444 days, and 7.85% for 700 days. This scheme came into effect on January 13, 2025.

BOB Introduces Flexible FD with Senior Citizen Benefits

Meanwhile, the Bank of Baroda introduced a liquid FD scheme that allows customers to make withdrawals in units of ₹1,000, offering flexibility for those needing access to funds.

A minimum deposit of ₹5,000 is required to open an account, with subsequent deposits also in multiples of ₹1,000. The tenure for these deposits ranges from 12 to 60 months, with varying interest rates depending on the duration.

Senior and super senior citizens enjoy additional interest benefits under this scheme, including extra returns for longer deposit periods. For example, senior citizens can earn an additional 0.5% on deposits up to three years and 0.6% on deposits over 3 years and up to 5 years, while super senior citizens enjoy an additional 0.1% on deposits longer than a year.

Conclusion

With liquidity shortages still affecting the banking sector, these initiatives reflect banks’ efforts to stay competitive and attract depositors by offering higher returns and specialised services.

Share Price Performance

IDBI Bank’s share price closed 6.6% lower at ₹73.18 on the NSE, while Bank of Baroda’s share price ended 0.77% down at ₹222 on the same exchange.

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