Bulk deposits rates witness a sharp fall due to ample liquidity
By Vaibhav Aggarwal
Apr 9, 2009
Print    Email    RSS   

With liquidity flushing into the system, banks are discouraging bulk deposits and thereby slashing interest rates by a large extent. Banks are offering as low as 5% on one year bulk deposits.

The system is filled with liquidity can be viewed through the banks move of parking Rs 1,22,000 crore with RBI through the reverse repo window. Banks are going to earn an interest rate of 3.5% on these funds.

It is this liquidity that is prompting bank to discourage bulk deposits and therefore they are cutting down interest rates on these deposits. State-run, Punjab National Bank (PNB) is offering the lowest card rate in the market. The bank has lowered the bulk deposit rates from 6.5% to 5% per annum and is only paying 1% on a seven day deposit.

In January, Indian Banks' Association (IBA) had set a uniform rate of 7.5% on bulk deposits for public sector banks but with rise in liquidity banks are reducing the rates. Recently a bank accepted a bulk deposit at an interest rate of just 3% and depositors agreed on such a low rate because money kept in the current account would enable him to earn much lower interest and moreover the tenure of the deposit was just 7 days.

During the last week of March 2009, bulk deposit rate had increased to 8% because banks were under pressure to meet their deposit targets for the fiscal. But after that the interest rates started easing.

In fact banks were willing to lend aggressively during the starting of the fiscal, which proved to be a clear signal of ample liquidity in the system. However market observers say that around Rs 18,000 crore are expected to move out of the system due to sale of government securities and treasury bills that are due for this week.

Meanwhile where banks are keen on lending, credit demand has been low thereby increasing the liquidity in the system. SBI's Chairman, O P Bhatt said that they have maintained high Statutory Liquidity Ratio (SLR) of 34% since there was a huge deposit mobilization and the corporates also did not draw the loans that were already sanctioned.

The head of treasury says that a sudden decline in the collateral based borrowing and lending obligation (CBLO) rate - rate at which banks borrower from each other against securities - also resulted in the fall of bulk deposit rates.

Bulk deposits are deposits over 1 crore.


(Comments Posted : 0) Post Your Comments
Show All Comments
 Select a product:

 Select a product:

Glittering Ways of Investing in Gold
Man caught for committing bank fraud
Effect of employment on loan eligibility...
A chronicle of excesses by loan recovery...
Pros and Cons of Personal loans

Loan to meet your needs. For more information...
Hello viewer am Albert mike from Kenya 30 years old...
HOTEL: CaℒL Giℛℒs In Kharar 09855660911...
Model Escoℛts Service In Pune 8888IOO484 Caℓℓ...
What is the outstanding Amount for my personal loan

LVB bank joined hands with NCML Feb 18, 2015
Syndicate Bank hiring 5000 new staff Feb 12, 2015
SBI donated Rs 8.6 cr as a part of CSR activity Feb 11, 2015
Canara Bank tied up with NHBC Feb 9, 2015
Hiring for Probationary clerks in South Indian Bank Feb 5, 2015
News Archive