Bulk depositors are capitalizing on banks' demand for funds, driving interest rates on large deposits higher. According to reports from The Hindu BusinessLine, interest rates on one-year bulk deposits (₹3 crore and above) have increased from an average 6.90-7.00 per cent level in January 2026 to about 7.50 per cent currently. This trend reflects the competitive landscape as banks compete for deposits to bridge the gap between credit growth and deposit growth.
The rate increases are driven by a significant gap in growth rates between credit and deposits. As reported by The Hindu BusinessLine, credit growth (year-on-year) of all scheduled banks at 14.88 per cent as on April 15 was 276 basis points higher than the deposit growth of 14.88 per cent, per RBI's latest data. This disparity creates pressure on banks to mobilize deposits aggressively to support their lending activities.
Institutional depositors are actively exploiting this market opportunity. According to reports from The Hindu BusinessLine, a senior executive with a public sector bank noted that a renowned temple trust issued a tender for placing a single ₹500 crore deposit, which is currently earning an interest rate of about 6.80 per cent with another bank. The temple trust is now believed to be seeking a return of at least 7.30 per cent, demonstrating the competitive pricing environment for large deposits.
Despite monetary easing measures, the transmission of rate cuts to bulk deposits has been limited. As reported by The Hindu BusinessLine, during the current easing cycle (February 2025 to February 2026), the repo rate has been cumulatively cut by 125 basis points from 6.50 per cent to 5.25 per cent, but the weighted average domestic term deposit rate on fresh and outstanding deposits have come down by only 97 bps and 47 bps, respectively. K Arvind, Head – Treasury at Tamilnad Mercantile Bank, explained that bulk deposit rates have not declined as banks need to mobilize resources to support credit growth.
Bank executives anticipate continued pressure on bulk deposit rates. Indian Bank's MD & CEO Binod Kumar stated that bulk deposit rates will increase if loan growth continues to grow faster than deposit growth, assuming the repo rate remains static. Kumar expects his bank to maintain the bulk deposit proportion at about 20 per cent of overall deposits. The trend reflects the ongoing challenge banks face in balancing credit demand with deposit mobilization in the current monetary policy environment.
