Banks seem to have become all the more aggressive in increasing the mobility of deposits with them. The last ten days have witnessed banks raising deposit rates by as much as 100 basis points. Amongst the banks which have raised their rates are five public sector banks and others are also expected to follow the trend.
Corporation Bank has raised deposit rates by 75 to 100 bps across different maturities. "We have hiked the deposit rate 75 to 100 basis points on various maturities. Liquidity is an issue in the banking system now and we need resources. We are aggressively campaigning to mop up deposits by doing road shows and outreach programmes," said Ramnath Pradeep, chairman and managing director of the bank.
Andhra Bank has increased rates of 1000 day deposits to 8.25%.
Rates have also been increased by Oriental Bank of Commerce and Union Bank of India.
Central Bank of India is offering 8% interest on 555 days deposit. The bank has already earned Rs 500 crore in ten days of launch of the scheme and aims to earn Rs 3,000 crore to Rs 4,000 crore by December end.
The aggressivess of banks in this regard follows the slow growth of deposits as witnessed in the fortnight last ended.
"One important consequence of negative real rates is that banks have seen a deceleration of deposit growth, as savers look for higher returns elsewhere. If bank credit is not to become a constraint to growth, real rates need to move in the direction of encouraging bank deposits," RBI had said.
"The pressure is building up on the liabilities side due to tight liquidity conditions. Large amounts have moved to public offerings. Now funds will also be sucked out of the system for payment of third tranche of advance taxes in the middle of December. This would compel us to revise their deposits rates," said Alok Misra, chairman and managing director of Bank of India.