Liquidity-hit banks kick off battle for bulk deposits
Battle for raising deposits has kicked off, with banks aggressively quoting higher interest rates, even upto 11% to attract bulk deposits. Views on stocks
By Sangita Mehta, ET Bureau |
MUMBAI: The battle for raising deposits has kicked off, with banks aggressively quoting higher rates to attract bulk deposits. The competitive spirit to woo investors is reflected in the reported move by Delhi-based Oriental Bank of Commerce to offer 11% on one-year deposits to oil exploration major Oil and National Gas Corporation (ONGC).
Interestingly, this comes at a time when other oil companies such as Indian Oil Corporation, HPCL and BPCL are borrowing short-term money at 11-11.25% for their daily requirements. In yet another deal, telecom company VSNL has placed slightly over Rs 200 crore with a private bank for 10.86% for eight months.
Also, capital market regulator, the Securities and Exchange Board of India (Sebi), is reported to have placed Rs 135 crore of deposits at similar rates recently.
Of late, bank officials say, a few government-owned banks have become very aggressive in raising deposits. Till recently, banks were offering 10.5% to 10.75% on one-year deposits. Now, with HDFC Bank and SBI offering 10% for one year, bankers fear rates on bulk deposits will cross 11%.
The tight liquidity condition in the money market is also forcing a number of banks to borrow from the bulk deposits market. On an average, banks are borrowing Rs 15,000-20,000 crore from the Reserve Bank of India at 9%.
Moreover, dealers feel that liquidity will tighten further towards the end of the month, when the hike in the cash reserve ratio ��� a portion of deposits that banks have to park with the central bank ��� comes into effect. It will take away Rs 9,000 crore from the system, following a 25-basis point increase in the cash reserve ratio to 9%.
Meanwhile, the rates offered on bulk deposits are much higher than that offered in March this year. Generally, banks offer higher rates in March to shore up their deposits base. In fact, last March, the finance ministry had instructed banks to stay away from bulk deposits in order to keep their cost of deposits at lower levels.
The treasury head of a state-owned bank said, ���The maximum rate offered in March was 10.30% for one year. Now, it looks like bulk deposit rates are sure to cross 11%.���
Interestingly, the war for bulk deposits is in contrast to the recent statement of Union finance minister P Chidambaram in which he had urged banks to mobilise low-cost deposits.
While inaugurating a Corporation Bank branch, he had said that banks should try to maintain their CASA ��� current and savings account ��� at 40% of their total deposit base.
Interestingly, this comes at a time when other oil companies such as Indian Oil Corporation, HPCL and BPCL are borrowing short-term money at 11-11.25% for their daily requirements. In yet another deal, telecom company VSNL has placed slightly over Rs 200 crore with a private bank for 10.86% for eight months.
Also, capital market regulator, the Securities and Exchange Board of India (Sebi), is reported to have placed Rs 135 crore of deposits at similar rates recently.
Of late, bank officials say, a few government-owned banks have become very aggressive in raising deposits. Till recently, banks were offering 10.5% to 10.75% on one-year deposits. Now, with HDFC Bank and SBI offering 10% for one year, bankers fear rates on bulk deposits will cross 11%.
The tight liquidity condition in the money market is also forcing a number of banks to borrow from the bulk deposits market. On an average, banks are borrowing Rs 15,000-20,000 crore from the Reserve Bank of India at 9%.
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Moreover, dealers feel that liquidity will tighten further towards the end of the month, when the hike in the cash reserve ratio ��� a portion of deposits that banks have to park with the central bank ��� comes into effect. It will take away Rs 9,000 crore from the system, following a 25-basis point increase in the cash reserve ratio to 9%.
Meanwhile, the rates offered on bulk deposits are much higher than that offered in March this year. Generally, banks offer higher rates in March to shore up their deposits base. In fact, last March, the finance ministry had instructed banks to stay away from bulk deposits in order to keep their cost of deposits at lower levels.
The treasury head of a state-owned bank said, ���The maximum rate offered in March was 10.30% for one year. Now, it looks like bulk deposit rates are sure to cross 11%.���
Interestingly, the war for bulk deposits is in contrast to the recent statement of Union finance minister P Chidambaram in which he had urged banks to mobilise low-cost deposits.
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While inaugurating a Corporation Bank branch, he had said that banks should try to maintain their CASA ��� current and savings account ��� at 40% of their total deposit base.
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