One basis point is 0.01 per cent.
Tuesday’s move by the two leading non-banking finance companies (NBFC) could point to higher future borrowing costs in India where rates slumped to the floor in the pandemic’s aftermath.
New deposit rates will apply immediately, and come ahead of next week’s meeting of the central bank’s Monetary Policy Committee.
“This is the first time in about two years that deposit rates have been raised,” said Anup Bhaiya, founder, MoneyHoney Financial. “The move should be seen as a prelude to a change in the interest rate cycle over the next two quarters.”
To be sure, higher deposit rates would mean slightly higher returns for savers putting their surplus funds into debt instruments.
“This should bring some cheer for savers struggling to beat inflation,” Bhaiya said.
Bajaj Finance increased corporate deposit rates by 30 basis points for tenors between two and five years.
Savers can now earn 6.65 per cent for 24-35-month maturities and 7.05 per cent for 36-60-month maturities.
Separately, HDFC, India’s biggest home financier, sought to realign interest rates in its corporate deposit plans. It raised long-term deposit rates by 5-10 basis points for three-year and five-year categories, but reduced one-year rates by a quarter percentage point.
HDFC is offering a maximum of 6.50 per cent for five-year deposits.
Shorter duration rates up to one-year maturity have risen lately, with the central bank seeking to normalize liquidity flows. The benchmark yield, however, hasn’t risen much.
The 364-day Treasury Bill last week yielded 4.13 per cent, 32 basis points higher than two months ago. Over the same period, the benchmark bond yield rose 12 basis points to 6.33 per cent.
“It is reasonable to expect higher funding costs amid a changing interest rate environment,” said Ajay Manglunia, managing director – institutional fixed income division at JM Financial. “With normalisation of excess liquidity, we can see some rise in market borrowing/lending rates, especially in the one to three-year segment.”
Three-year triple-A rated corporate bonds are now yielding in the range of 5-5.25 per cent, about 50-60 basis points higher than the levels seen six months ago.
