Bandhan Bank has increased interest rates on fixed deposits, offering a maximum of 7.95% to senior citizens for tenures between two and three years. This move is part of the bank's strategy to mobilize more retail deposits to support its credit portfolio. While the higher rates benefit depositors, they also raise the bank's cost of funds, which investors will monitor in relation to net interest margins.
What Happened
Bandhan Bank has revised its fixed deposit (FD) interest rates, marking an upward adjustment for several tenures. For senior citizens, the bank is now offering a maximum interest rate of 7.95% on deposits maturing between two years and less than three years. For the same tenure, non-senior citizens will receive 7.45%. Additionally, for deposits ranging from three years to less than five years, the rates have been set at 7.75% for senior citizens and 7.25% for other customers. The bank also noted that its savings account rate stands at 6.5% for balances between ₹5 lakh and ₹10 lakh.
Why Banks Are Raising Deposit Rates
The banking sector in India is currently in a phase where lenders are aggressively competing to attract retail deposits. This is largely driven by the need to maintain a healthy credit-deposit (CD) ratio. Banks require a steady stream of retail deposits to fund their loan books without relying too heavily on more expensive wholesale funding sources. For Bandhan Bank, which reported a deposit base of ₹1.66 lakh crore as of March 31, 2026, mobilizing granular retail deposits is a strategic priority to ensure stable liquidity.
The Cost Of Funds Trade-Off
While higher interest rates are positive for depositors, they change the financial math for the bank. When a bank raises the interest it pays to depositors, its cost of funds increases. To maintain or improve its profitability—often measured by the Net Interest Margin (NIM)—the bank must carefully manage its lending rates and asset quality. If the cost of gathering deposits rises faster than the income earned from loans, it can put pressure on profit margins. Investors typically track whether a bank can pass these higher costs on to borrowers or if it leads to a temporary squeeze on earnings.
Business Context And Competition
Bandhan Bank operates with a significant exposure to micro-banking and retail assets. This business model requires consistent liquidity to manage the short-term nature of many of its loan products. In the current sector environment, many private and small finance banks are offering similar or competitive rates to shore up their balance sheets. The success of this move will depend on whether the bank can continue to grow its deposit base faster than its credit growth, thereby improving its liquidity profile.
What Investors Should Track
Going forward, the key monitorable for shareholders is the impact of these higher deposit rates on the bank's Net Interest Margin in upcoming quarterly results. Additionally, investors often watch the Credit-Deposit ratio to see if the bank is successfully closing the gap between its loan book growth and deposit mobilization. Management commentary regarding the cost of funds and the sustainability of loan pricing will also be important to understand how the bank plans to balance deposit growth with profitability.