Indian Bank has increased deposit rates by 15 basis points on select maturities, becoming the first major bank to do so within 15 days of policy rate tightening by the Reserve Bank of India. According to reports from The Economic Times, the state-owned lender announced it would offer higher rates on special term deposits effective from October 23, 2026. The interest rate on 555 days deposits has been increased to 6.80% from 6.65%, while the rate on the 777 days scheme would carry 6.75% instead of 6.60%. As per Business Standard, the bank raised rates on its 555-day 'Ind Grow' deposit scheme and 777-day 'Ind Prosper' deposit scheme by 15 basis points each. The bank's Asset Liability Management Committee approved the upward revisions at its meeting on October 22, 2026, after considering various aspects of bank deposits, according to the company's exchange filing.
The 15-basis-point hike in rates will provide depositors with significantly higher returns across both special term deposit schemes. With ₹1 lakh in the Ind Grow scheme with 555-day tenure, the 6.80% interest rate will accrue approximately ₹228 more interest than it would have with the previous 6.65% rate. Similarly, depositors investing ₹1 lakh in the Ind Prosper scheme with 777-day tenure will earn about ₹320 more on the higher rate of 6.75% compared to the previous 6.60%. For larger investments, ₹5 lakh in the Ind Grow FD could earn approximately ₹51,800 in interest, taking the total maturity amount to around ₹5.52 lakh at the revised rate, compared to ₹50,600 and ₹5.51 lakh respectively at the earlier rate. The Ind Prosper FD for the same amount could generate approximately ₹71,900 in interest, resulting in a total maturity of around ₹5.72 lakh. The shorter-tenure Ind Grow scheme continues to offer a higher interest rate than Ind Prosper, with the difference between the two schemes remaining five basis points.
According to The Economic Times, Indian Bank managing director Binod Kumar revealed that the bank does not have surplus liquidity as it shed ₹10,000 crore of bulk deposits and slowed term deposits mobilisation during the second quarter. However, the bank raised $2.3 billion (about ₹21,000 crore) of foreign currency non-resident-bank (FCNR-B) deposits using the regulatory window. The broader inter-bank market has been flush with surplus funds following a record $133 billion FCNR-B mobilisation at the sectoral level, forcing the RBI to conduct aggressive liquidity drain-out operations. This context highlights how banks are managing liquidity while responding to RBI policy changes.
The rate increase follows the Reserve Bank of India's unanimous decision to raise the repo rate by 25 basis points to 5.50% on October 7, marking the first rate hike in nearly four years. As per the latest MPC minutes released on Wednesday, all six committee members voted for the hike, with RBI Governor Sanjay Malhotra noting that the change in stance essentially indicated rate cuts are off the table in the near term. The decision was driven by rising inflation and signs of price pressures spreading across a wider range of goods, with 37% of commodities recording inflation above 4% in August compared to just 20% in March. Looking ahead, SBI Research has retained its forecast of a cumulative 50-basis-point interest rate hike by the RBI in December, citing persistent inflationary pressures and elevated crude oil prices that strengthen the case for monetary tightening. In its latest analysis, SBI Research said the Governor's communication showed a greater focus on future risks and the possibility of further tightening, with the MPC having changed its stance to calibrated tightening.
While Indian Bank has updated its rates, several other major banks have not yet adjusted their fixed deposit offerings. HDFC Bank offers a maximum of 6.50% interest per annum for FDs with tenures ranging from three years and one day to less than four years and seven months. State Bank of India is providing customers a chance to earn up to 6.45% interest on FDs lasting from two years to less than three years. Axis Bank is offering customers up to 6.5% interest on term deposits lasting from 18 months to 10 years. ICICI Bank customers can earn up to 6.6% interest on their fixed deposit, applicable on the bank's tax saver FDs as well as those with tenures from three years and one day to 10 years. Punjab National Bank customers can earn anywhere from 3% to 6.5% interest, depending on the tenure of their FD. Kotak Mahindra Bank is offering customers term deposit interest rates from 2.75% to 6.65%. Customers are advised to check the latest FD rates on their bank's website before making any investment decisions.
