Banks increase bulk deposit rates
by 4, March, 2010 1 |
As a step towards fulfilling the year end targets, banks have taken recourse to increasing interest rates on bulk deposits instead of retail deposits.
Traditionally, banks have always given higher interest rates on bulk deposits with minimum deposit amount of Rs. 1 crore. It is due to the fact that bulk fixed deposits tend to be more economical as against retail deposits.
But because of higher liquidity available with the banks during the past years, they had reduced interest rates in order to prevent extra inflow of funds into them. The situation was so bad that the banks offered retail depositors nearly 150 basis points more than the bulk depositors.
But with the change in the economic situation, the banks have began paying bulk depositors interest rates that are 75-100 basis points more than that paid for retail deposits. Banks have commenced paying about 5.5-5.75% for 3-6 months as compared to 5% offered for the retail depositors. Nearly a month ago, the bulk depositors earned 3.5% for the same duration.
Banks say their action for increasing bulk deposit rates was due to increase in cash reserve ratio as a liquidity tightening step by RBI. Also short term rates have gone up as many banks intend to restore their deposit quota. This can lead to increase in the rates on personal loans.
For multi-crore deposits for 3 months, banks are offering 4.5% as compared to 2.5-3% offered previously.
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