As the recent policy stance by RBI seems to press interest rates downwards, banks are planning to hold back on their special term deposit schemes that generally offer attractive interest rates.
These schemes are ‘special' because they offer higher interest rates in comparison to rates offered on deposits that have almost similar tenure as the special term.
Recently, Union Bank of India (UBI) has decided to pull out its 900-day deposit scheme from the market. This scheme offers an interest rate of 10.5% per annum which will not be available for long. "We will reduce deposit rates with effect from November 9. We have decided to withdraw the 900-day scheme on which we offer 10.5% rate per annum. There will be no change in deposit rates for other time buckets," said MV Nair, Chairman and Managing Director of UBI. In the past one month, bank has mobilized Rs 4,000 crore worth of funds through this scheme.
Besides, UBI has also withdrawn its one year deposit scheme from November 1st. UCO Bank too is extending its one year deposit scheme that offers 10.5% interest rate for only the festive season.
The current scenario clears the picture that interest rates on deposits are about to fall in the coming days. Therefore if you wish to make an investment then this would be an apt time to move ahead and fix your money in fixed deposits offered by the banks.
For instance the largest lender, SBI is yet to take a decision on its deposit rates. However there are a few those have decided to cut down their deposit rates and in the process of deciding the extent of reduction. Also they are revising the tenure of the deposits.
Allahabad Bank, Bank of India, UBI, UCO Bank had recently increased its deposit rates but now even they are reconsidering their move because of the prevailing market conditions.
Executive Director of UBI, TM Bhasin said: "After RBI's signal to lower interest rates in general, our deposit rates have to be corrected now."
RBI has cut its lending rates on all the loans that are linked to prime lending rate (PLR). "More reductions in lending rates will be considered commensurating with decrease in deposit rate in the next week," added Mr. Bhasin.
Uco Bank CMD SK Goel said: "We will take a decision on rates on November 10. By then, the real impact of Reserve Bank of India's liquidity infusion doses will be clear."