NRI deposits rise 37% on high domestic interest rates

http://www.thehindubusinessline.com/industry-and-economy/banking/nri-deposits-rise-37-on-high-domestic-interest-rates/article4603194.ece

Non-resident Indians (NRIs) are keeping faith with the returns their banks back home are giving them.

In the first eleven months of FY13, NRI deposits in the banking system rose 37 per cent (by $13.379 billion against $9.733 billion in the year-ago period).

The NRI deposit accretion was solely in the non-resident (external) rupee account or NRE account. In the reporting period, NRE deposits soared by a whopping 161 per cent at $15.271 billion ($5.854 billion in the year-ago period).

NRIs may be pouring money into the NRE deposits because they fetch handsome returns (for example, SBI is offering 8.75 per cent interest on NRE deposits of 1-10 years).

Another reason why NRIs may be parking money in NRE deposits is that they may be taking a view that the rupee will appreciate down the line, thereby enabling them to make gains at the time when the deposit matures, said a senior public sector bank official.

For example, if NRIs place NRE deposits now then the dollars they remit will fetch them Rs 54.50 a dollar. However, if the rupee appreciates to (say) 50 to the dollar at the time of maturity of the deposit (say two years down the line) then the depositor makes a gain of Rs 4.50 a dollar. Besides, the possible exchange rate gain, he earns interest on the deposit.

The other two components of NRI deposits — Foreign Currency (Non-Resident) or FCNR Account and Non-Resident Ordinary (NRO) Rupee Account — have seen outflows.

NRO deposits saw an outflow of $1.732 billion (against an accretion of $3.926 billion). FCNR deposits declined $160 million (against a decline of $48 million).

Interest rates on PPF, small savings cut by 10 basis points

http://www.thehindu.com/business/Industry/interest-rates-for-post-office-savings-schemes-cut/article4546909.ece

Easing of interest rates, in keeping with a downtrend in inflation, is not a one-way street as lakhs of small savers and PPF (Public Provident Fund) account holders will learn the hard way from the new fiscal year.

Starting April 1, PPF deposits along with most of the post office savings schemes will fetch reduced returns owing to a cut in interest rates by 10 basis points each. According to a Finance Ministry statement here, the interest rate on PPF will stand reduced from 8.8 per cent to 8.7 per cent with effect from April 1. Likewise, the five-year maturity Monthly Income Scheme (MIS) will earn an interest of 8.4 per cent instead of 8.5 per cent during the current fiscal ending March 31.

The only exception, however, has been made in the case of savings deposit schemes and fixed deposits of up to one year run by post offices with their interest rates kept unchanged at 4 per cent and 8.2 per cent, respectively. All other savings schemes falling under the NSSF (National Small Savings Fund) will see a reduction in interest rates by 10 basis points which would be applicable for the entire fiscal year 2013-14.

For instance, the National Savings Certificates (NSC) having five and 10-year maturity periods will now earn interest rates of 8.5 per cent and 8.8 per cent, respectively, as against 8.6 per cent and 8.9 per cent hitherto. The interest rate for SCSS (Senior Citizens Savings Scheme) also stands reduced to 9.2 per cent from 9.3 per cent. The revision in interest rates is in line with the recommendations of the Shyamala Gopinath Committee which, among other things, had suggested that the returns on small savings should be in sync with market rates determined by the returns offered by other securities.

Although the lower interest rates may come as a blow to small savers, Planning Commission Deputy Chairman Montek Singh Ahluwalia sought to justify the reduction. “In real terms, inflation is much lower than it was two years ago. So, in real terms, the interest rate is more favourable,” he said.

Explaining further on the sidelines of an event here, he said: “I don’t believe that interest rate for savers through the post office system can be de-linked completely from the interest rate system in the country…If you want [a] low [interest] rate environment, you cannot say, ‘I want higher interest rate for savers and low interest rate for borrowers’. They have probably moderated [interest rate] a little bit in line with the softening of interest rates.”

'Unclaimed deposits of over Rs 2,481 crore in banks till Dec 2011'

http://www.financialexpress.com/news/unclaimed-deposits-of-over-rs-2481-crore-in-banks-till-dec-2011/1078163/0

About Rs 2,481.40 crore was lying as unclaimed deposits in over 1.12 crore bank accounts till December, 2011 as per information provided by the Reserve Bank, Parliament was informed today.

"The Reserve Bank of India (RBI) has informed that as on December 31, 2011, a total amount of Rs 2,481.40 crore in 1,12,49,844 accounts is lying as unclaimed deposits with the commercial banks," Minister of State for Finance Namo Narain Meena told Lok Sabha in a written reply.

He said in the Banking Laws (Amendment) Act, 2012, a new section has been inserted in the Banking Regulation Act empowering the RBI to establish the 'Depositor Education and Awareness Fund' for the unclaimed deposits lying with any bank for more than 10 years.

"This fund will be utilised for promotion of depositors' interest and for such other purposes which may be necessary for the promotion of depositors' interest as may be specified by the RBI from time to time," the Minister said.

He further said the RBI shall specify an authority or committee to administer the fund.

Meena said, to deal with inoperative and unclaimed deposits accounts, RBI has given detailed instructions to banks such as annual review of inoperative accounts, making these accounts operative after due diligence, non-levy of charges for activation of inoperative accounts, etc.

They have been advised to find the whereabouts of the customers and their legal heirs, he said.

Also, RBI has instructed banks to play a more proactive role in finding the whereabouts of the account holders of unclaimed deposits/inoperative accounts and also to display the list of unclaimed deposits of inoperative accounts which are not in operation for 10 years or more, on their websites.

Cut lock-in period for tax saving deposits to 3 yrs: Bankers

http://www.thehindubusinessline.com/industry-and-economy/banking/cut-lockin-period-for-tax-saving-deposits-to-3-yrs-bankers/article4283176.ece

Bankers today demanded that lock-in period for tax saving deposits be brought down to three years from five years to channelise more funds into the banking sector.

In a pre-budget consultation with Finance Minister P Chidambaram, bankers also sought permission to issue tax-free bonds like other financial institutions for raising funds and augmenting business.

“Tax saving bonds are already there (with banks), tax saving deposits are already there. So there was a requirement that this lock-in period should be reduced from five years to three years on the tax saving deposits to bring it in line with tax saving ELSS (equity linked saving schemes),” SBI Chairman Pratip Chaudhuri said.

He was talking to reporters after the meeting of bankers with the Finance Minister.

“Some of the banks...made a request that they should also be allowed to issue tax-free bonds as has been allowed to other financial institutions because banks have good distribution network and can finance infrastructure projects,” he said.

Bankers who attended the meeting include Indian Overseas Bank CMD M Narendra, UCO Bank CMD Arun Kaul, Punjab National Bank CMD K R Kamath, ICICI Bank MD Chanda Kochhar, Axis Bank MD Shikha Sharma and Chairman of HDFC Ltd Deepak Parekh.

Besides, RBI Deputy Governor K C Chakrabarty also attended the meeting.

On gold imports, the bankers said the import was also connected to jewellery exports and any efforts to bring down the inbound shipments would affect jewellery exports.

“Any restriction on gold import should be done carefully and in a calibrated manner because gold import has also a correlation with jewellery export,” Chaudhuri said.

No cartelisation in fixing savings deposit rates: SBI

http://www.thehindubusinessline.com/industry-and-economy/banking/no-cartelisation-in-fixing-savings-deposit-rates-sbi/article4166993.ece

The nation’s largest bank SBI today dismissed allegations of cartelisation by big banks in keeping savings deposit rate unchanged despite the RBI deregulating this over a year ago.

Disputing the charges, SBI Managing Director and Chief Financial Officer Diwakar Gupta said the bank’s decision not to raise interest rates on savings deposits is a purely commercial one and does not amount to cartelisation.

“I said it is not cartelisation,” Gupta told reporters on the sidelines of a conference organised by consulting and accounting major PwC here.

SBI and its five subsidiaries, which nearly control 25 per cent of the banking system, have not increased their savings account deposit rates. They offer 4 per cent.

Gupta said he has been reading reports over the past few days about a possible action by the competition watchdog on banks for allegedly acting as a cartel by not increasing the rate on saving deposits, which was deregulated by the Reserve Bank in the October 2011 credit policy.

The interest rate on savings accounts was the only regulated product in banking till the RBI deregulated it.

Following this, only two commercial banks — Kotak Mahindra and Yes Bank — raised the deposit rates to 6 and 7 per cent respectively. These banks, which were facing problems in raising the low-cost CASA (Current Account, Savings Account) deposits in the past, claim the move has been immensely beneficial.

From the cooperatives space, city-based Saraswat Bank had also increased the rate to 7 per cent.

Other banks currently offer just 4 per cent on an annualised basis to savings bank account holders, which was even lower at 3.5 per cent till April 2011.

Two-thirds of bank deposits have no insurance cover

http://www.thehindubusinessline.com/industry-and-economy/banking/twothirds-of-bank-deposits-have-no-insurance-cover/article4130682.ece

Bank deposits of Rs 38 lakh crore, accounting for 67 per cent of the total deposits, do not have cover from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as of September 2011.

The figure was Rs 32 lakh crore a year ago. This is based on data from the Reserve Bank of India.

The falling insurance cover is due to the rising proportion of high-value deposits. Bank depositors enjoy insurance cover on deposits up to Rs 1 lakh. This means that if a bank goes belly up, each account will still recover up to Rs 1 lakh from the Corporation.

Some experts feel that the situation calls for a revision in the insurance cover offered. The insurance limit of Rs 1 lakh per account was set way back in 1993. With inflation averaging 6.5 per cent in the last two decades, a Rs 1 lakh deposit then would equal Rs 3.3 lakh at today’s prices.

SMALL INVESTORS

Bankers, however, counter that this may not pose much of a risk to small investors, as most are likely to have deposits of less than Rs 1 lakh. In fact, banks have deposit accounts (savings and time deposits) numbering 107 crore. Of these, 99.6 crore deposit accounts, or 93 per cent, have less than Rs 1 lakh as balance.

The DICGC’s deposit insurance fund, which is supposed to meet these liabilities, had a Rs 30,000-crore balance by March 2012. While it added Rs 5,300 crore by way of inflows for the year, it met demands of Rs 287 crore towards insurance claims. This fund’s balances amount to 1.6 per cent of the underlying deposits insured.

Regional Rural Banks have the highest proportion of insured deposits at 74 per cent followed by co-operative banks with 62 per cent of the deposit value insured. Commercial banks, on the other hand, have only 30 per cent of the deposit value insured.

SBI TOPS

State Bank of India and its associate banks have 35 per cent of their deposits insured (in terms of value) making it highest among the commercial banking group. Private banks and foreign banks, on the other hand, have 23 per cent and 8.4 per cent, respectively, of their deposits insured because of a larger proportion of high-value deposits on their books.

The average deposit per account as of September 2011 has risen to Rs 53,000 per account up from Rs 7,700 when the Corporation increased the limit to Rs 1 lakh in 1993.

Among individual accounts, while public sector banks’ depositors have around Rs 40,000 per account, private banks have deposit per account in excess of Rs 51,000. Foreign banks’ deposit per account is more than Rs 2 lakh.

Banks should credit interest every month, says depositors’ body

http://www.thehindubusinessline.com/industry-and-economy/banking/banks-should-credit-interest-every-month-says-depositors-body/article4003022.ece

When banks receive interest on loans at monthly intervals, then shouldn’t depositors also get the same deal?

A depositors’ body has flagged the issue of depositors getting a raw deal with the Reserve Bank of India (RBI).

Banks have been charging interest on loans and advances at monthly intervals (as against quarterly intervals earlier) with effect from April 1, 2002. Due to the reduction in the interest application frequency, the yield on bank loans have increased, the All-India Bank Depositors Association said.

However, banks pay interest on savings bank (SB) and term deposits at ‘quarterly or longer intervals’, resulting in depositors getting relatively less yield on their deposits.

The association pointed out that throughout the RBI’s regulated as well as deregulated regime on SB and term deposit interest rate, there was no standard on the interest application frequency. This resulted in the annual percentage yield on the deposits being different for different banks.

“We are pursuing with the central bank to get banks to credit interest on deposits uniformly at monthly rests. This will help depositors realistically compare deposits rates.

“Currently, depositors are not able to make an objective comparison of deposit rates as interest is credited at quarterly or longer intervals,” said Ashok Ravat, Honorary Secretary, All-India Bank Depositors’ Association.

He emphasised that the central bank should balance the interests of banks and the depositors. The depositors’ body said the question of the RBI’s inability, till date, on standardising the interest application frequency was a cause for concern. In the interest of depositors, it wants to have only one simple standard (based on crediting of interest at monthly intervals) to compare returns on deposits.

Usha Thorat, Director, Centre for Advanced Financial Research and Learning, in a speech last year, said that the current asymmetry between the periodicity of interest paid to depositors on their savings account and the interest charged on their loan account needs to be reviewed by regulators to address the existing anomaly.

As per RBI data, banks in India had deposits aggregating to about Rs 65-lakh crore as on September 28, 2012.

Interest on savings bank deposits may fall

http://www.business-standard.com/india/news/interestsavings-bank-deposits-may-fall/487876/

Savings bank deposits might fetch lower returns. For the first time since rates on these were deregulated in October 2011, leading banks are considering reducing it, as the interest rate cycle has started showing a downward bias.

Bankers say a cut in the savings bank rate is needed to protect net interest margins (NIMs).

“There is a distinct possibility banks may cut savings bank interest rates. The fact of the matter is if the whole interest rate structure comes down and you don’t cut the savings bank rate, your margins would be impacted,” said Aditya Puri, managing director, HDFC Bank.

To protect NIMs, banks have already cut fixed deposit rates on retail term deposits across maturities.

For many quarters, HDFC Bank has maintained a net interest margin of 4.15-4.35 per cent. Now that the second-largest private sector lender is considering a cut in its base rate (the benchmark rate to which all loans are linked), its margins would be under pressure if the cost of funds do not decline.

HDFC Bank’s margins are boosted by the high proportion of low-cost deposits. The bank’s current account and savings account deposits account for 46 per cent of total deposits, one of the highest in the sector.

Most commercial banks pay four per cent interest on savings bank deposits, though some offer more.

YES Bank offers seven per cent on deposits of more than Rs 1,00,000, while Kotak Mahindra Bank and IndusInd Bank offer six per cent. These banks had raised the interest on savings deposits after the Reserve Bank of India (RBI) had deregulated these rates. This had helped the banks garner more of these deposits.

SBI sits on excess fund of Rs 80,000 crore, could lower lending rates further

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sbi-sits-on-excess-fund-of-rs-80000-crore-could-lower-lending-rates-further/articleshow/165

State Bank of India is sitting on excess funds of around Rs 80,000 crore, an amount equivalent to what all banks put together borrow from the central bank, indicating it could lower lending rates further. Last week, the lender lowered the so-called base rate to 9.75 per cent from 10 per cent earlier. A basis point is 0.01 percentage point.

The bank's deposit growth has been double that of loans, allowing it to be liberal with lending rates to boost flagging demand for loans.

SBI chairman Pratip Chaudhuri said that the bank has seen robust growth in deposit mobilisation while demand for loans is lukewarm. He said, in the first five months of this fiscal year, the bank has seen a deposit growth of 8 per cent while advances have risen 4 per cent. On a year-on-year basis, deposits rose 22 per cent while advances grew 14 per cent.

The central bank has projected loan growth of 17 per cent and deposit growth of 16 per cent for the current fiscal year.

Chaudhuri indicated that the bank has started investing surplus money in commercial papers and certificate of deposits besides investing in government securities. He said the bank holds excess government securities to the tune of five percentage points than mandated by RBI. The central bank mandates banks to hold 23 per cent of their deposits in the form of Gilts.

In 2009, post-credit crisis period, excess liquidity to the tune of Rs 70,000 crore at SBI led to the former-chairman OP Bhatt launching fixed home loan rate of 8 per cent for the first year. The scheme, which was termed as teaser scheme, was disapproved by the Reserve Bank of India.

The current chairman Pratip Chaudhuri has lowered lending rates across the board by cutting base rate and prime lending rate by 25 basis points to 9.75 per cent and 14.50 per cent, respectively. Besides, the bank has lowered lending rates for home loans up to Rs 30 lakh to 10 per cent and for loans above Rs 30 lakh to 10.15 per cent.

Even as SBI lowered the lending rates, Chaudhuri said the bank will not disappoint its depositors. "We will not bring deposit rates below the post office savings rate of 8.5 per cent," he said. When asked if the bank could look at a further reduction in lending rates, SBI chief said: "Already our interest rates on loans are the lowest in the industry. Also, we have an obligation to our shareholders."

He said that total sacrifice due to cut in lending rates is Rs 1,250 crore. He indicated that despite the cut in the lending rate, the bank is maintaining a healthy net interest margin.

"NIMs are very robust at 3.94 per cent for the month ended August," he said. SBI's margin for the first quarter ended June 2012 stood at 3.2 per cent.

NRI deposits in banks surge six-fold in April-July

http://www.thehindubusinessline.com/industry-and-economy/banking/article3889520.ece

Attracted by high interest rates in their homeland, Non-Resident Indians (NRIs) are pouring money into bank deposits.

In the financial year so far (April-July), NRIs have parked almost six times more money in deposits compared with the year-ago period.

According to Reserve Bank of India data, NRIs made deposits aggregating $7.375 billion in banks, against $1.246 billion in the year-ago period.

A break-up shows that all inflows have been into the Non-Resident (External) Rupee Accounts (NR(E)RA) deposits.

However, two other NRI deposit schemes — Foreign Currency Non-Resident (Banks) or FCNR (B) and Non-Resident Ordinary Rupee Account or NRO — have seen outflows.

In the first four months of the current financial year, NR(E)RA deposits saw robust inflows of $8.389 billion against outflows of $641 million in the year-ago period. FCNR(B) deposits have seen an outflow of $625 million against inflows of $853 million in the year-ago period.

NRO deposits too have seen outflows of $389 million against an accretion of $1.034 billion in the year-ago period.

The attractiveness of NR(E)RA deposits lies in the fact that they fetch high interest rate (for example, State Bank of India offers 8.50 per cent on deposits between one year and 10 years).

Further, the accrued interest income and balances held in the account are exempt from income-tax and wealth tax. The other two deposits schemes — FCNR(B) and NRO — do not enjoy tax exemptions, said a banker. Loans up to Rs 1 crore can be extended against security of funds held in NRE Account either to the depositors or third parties.

“Due to higher interest rate and tax exemptions, NRIs are parking money in NR(E)RA deposits. The proceeds of FCNR(B) and NRO deposits are also finding their way into NR(E)RA deposits,” said a public sector bank official.

As at July-end, NRI deposits with banks stood $62.45 billion against $53.33 billion in the year-ago period.

Non-resident Indian deposit inflows drop sharply in July: RBI

http://economictimes.indiatimes.com/news/nri/forex-and-remittance/non-resident-indian-deposit-inflows-drop-sharply-in-july-rbi/articleshow/16369032.cms

Indians living overseas have parked less money with Indian banks in July, compared with the previous two months, as an initial euphoria over RBI's efforts to attract such deposits waned, bankers said. 

NRI deposit inflows fell to $822 million in July, from $1.7 billion in June and $2.8 billion in May, data from the Reserve Bank of India ( RBI) showed on Wednesday. 

For the fiscal year that started in April, the highest NRI deposit inflows were seen in May when the central bank announced measures to bolster foreign currency inflows after the rupee fell sharply. 

In May, the central bank relaxed the interest rate ceiling on foreign currency non-resident deposits and allowed banks to freely determine the interest rates on export credit in foreign currency. It also eased restrictions on the usage of foreign currency deposits. 

Why low deposit rates may be short-lived for banks

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/why-low-deposit-rates-may-be-short-lived-for-banks/articleshow/16359947.cms

Last week, the country's largest lender State Bank of India (SBI) reduced interest rates on term deposits by as much as 100 basis points, but hardly anyone said that it is the beginning of a trend. On the contrary, many said that banks may be forced to take a U-turn in a few months or quarters if the government succeeds in what it aspires to do - revive economic growth.

The fact that deposits growth rate is bumping around a near decade low and nearly three-fourth of the economic activity is funded by the banks, unlike markets in the West, low deposit rates may be short lived. Also, investors have shown their reluctance to be dictated by the administration by moving away to real assets such as gold and real estate in times of negative real returns, which amounts to losing money after adjusting for inflation.

Yes, the incremental credit-to-deposits ratio is at 30% in the absence of demand for new loans from hobbled businesses, but it may be a temporary phenomenon.

The overall loans-to-deposits ratio still remains at 75%, reflecting that out of every Rs 100 as deposits, Rs 75 has been lent. With banks mandated to own at least 23% in government bonds and 4.75% in cash with the Reserve Bank of India, banks are relying on other sources of funds to lend. These ratios will never match. Banks, in their eagerness to please investors, have, in the past few years, raised short-term deposits, (which are low cost), and lent long term for building power plants and roads.

With many of these borrowers not in a position to repay now, banks will come under pressure to repay depositors. So, to ensure that they don't default, banks have to keep mobilising deposits at higher rates even if they don't have much demand for loans. Also, SBI may be an exception in attracting deposits as safety-loving savers prefer bank deposits, especially SBI, to rivals or equities. 

RBI slams 'discrimination' in bank rates

http://www.financialexpress.com/news/rbi-slams-discrimination-in-bank-rates/999253/0

Reserve Bank (RBI) deputy governor K C Chakrabarty today berated banks' tendency to offer better interest rates to high-value deposits.

"I don't understand why banks treat poor customers badly by offering lower rates on their deposits and reward the rich with higher prices. I am not saying both should be at par, but the prevailing different rates are bit too high.

"We at RBI would want banks to offer more or less similar rates to all depositors, although a reasonable difference is fine," the seniormost deputy governor told a gathering at the MR Pai memorial award function.

Referring to the minimum balance requirement for savings accounts which currently varies from Rs 500 to 50,000 for a quarter, and also the varying penalties for not maintaining the required balance, Chakrabarty said, "In fact banks are charging this fee without giving any service to the customer."

Therefore, he said, RBI has made it mandatory for banks not to turn down anyone who wants to open a basic bank account, if he/she can provide the KYC documents. On the service charges which banks make customers pay, Chakrabarty (who looks after customer service and banking operations at RBI among other things) said these charges are in fact "survival charges and not service charges".

Deposits grow 14 per cent - annual y-o-y growth

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/deposits-grow-14-per-cent-farm-loans-boost-credit-offtake/articleshow/16279096.cms

Banks are seeing a modest growth in both deposits as well as credit, the latest Reserve Bank of India data shows. While aggregate deposits stood at Rs 63 lakh crore as on August 24, loans were at Rs 47 lakh crore. At these levels, the annual year-on-year growth in deposits works out to 14.12 per cent, compared with RBI's projection of 16 per cent. The annual credit growth is 16.66 per cent, almost in line with central bank's projection of 17 per cent for the current fiscal. 

On an incremental basis, deposit growth is 6.3 per cent compared with 5.5 per cent a year ago, while loans have grown by 2.4 per cent compared with 2.8 per cent a year ago. At the system level, credit growth has been more or less in line with the projections of the central bank, but deposit growth has lagged this year. The credit to deposit ratio is about 73 per cent — this means out of every rs 100 raised as deposits, banks are lending Rs 73. However, on an incremental basis , the ratio works out to only 30 per cent. 

The country's largest bank, State Bank of India, has slashed deposit rates by 50 to 75 basis points (one basis point is 0.01 per cent) as it is surplus in deposits. As per the new base rate system, this will give the bank room to cut lending rate as well. "As of now, we are surplus in deposits. For SBI, the challenge is more in pushing credit," said Pratip Chaudhuri, chairman, SBI, on the sidelines of a banking conference in Mumbai. 

SBI cuts fixed deposit rates by 0.5-1%

http://www.thehindubusinessline.com/industry-and-economy/banking/article3861781.ece

The country’s largest bank SBI today announced a reduction in interest rate on fixed deposits by 0.5 per cent for most of the maturity periods, a move likely to be followed by other lenders.

However, for deposits between 241 days and one year, the downward revision is 1 per cent. The new rate would be 6.5 per cent as against 7.5 per cent.

Of the total of nine maturity periods for fixed deposits, a 0.5 per cent downward rate revision has been announced for 6 categories.

The new rates would be effective from September 7, SBI said in a statement.

With the revision, the interest rate on 7-90 days fixed deposit would come down to 6.50 per cent, from 7 per cent.

Similarly, term deposits of 91-179 days would be down by 0.5 per cent, at 6.50 per cent and 180 days fixed deposits would also attract 6.50 per cent interest rate.

Fixed deposits with maturity of 181-240 days would now provide interest rate of 6.50 per cent, down from 7.25 per cent.

For one year to less than two-year maturity period fixed deposits, the new rate will be to 8.5 per cent as against 9 per cent, down by 0.5 per cent.

At the same time, the interest rate for fixed deposits with maturity period between two-three years and three-five years has been slashed by 0.5 per cent to 8.5 per cent.

However, the bank has left interest rates unchanged at 8.5 per cent for term deposit of 5-10 years.

RBI asks banks to post bulk deposit rates on website

http://www.business-standard.com/india/news/rbi-asks-banks-to-post-bulk-deposit-rateswebsite/484960/

The Reserve Bank of India (RBI) has asked banks to put up bulk deposit rate on their websites, to stop banks from offering exorbitant rates to corporate depositors.

According to RBI norms, no bank can offer varying rates on the same day at different locations. According to bankers, some of the banks are offering as much as 200 basis points higher than the card rate to their corporate clients. 

Bulk deposits are corporate deposits that are generally Rs 1 crore and above with maturity of up to one year.

The central bank’s directive comes following the finance ministry’s effort to discourage banks’ rush for bulk and certificates of deposit, which are of high cost and adversely impact margins. The ministry had asked banks to cut down their proportion of high cost deposits (bulk deposit and certificates of deposit) to 15 per cent, with a cap of 10 per cent on bulk deposits.

About 25-30 per cent of the deposits of public sector banks are bulk in nature. The central bank and the finance ministry’s concern over exorbitant bulk deposit rate comes on the back of banks scrambling for funds during the end of the previous financial year.

In March, bulk deposit rate crossed 12 per cent, higher by 100 basis points in a month. As a result, deposit growth in March swelled by Rs 3 lakh crore — one third of the deposits garnered in 2011-12.

The finance ministry and RBI had also asked the public sector banks not to bid for bulk deposits.

7% interest on savings accounts helps smaller banks gain

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/7-interest-on-savings-accounts-helps-smaller-banks-gain/articleshow/15987071.cms

Large banks may have refused to revise their interest rates on savings deposits, but there are clear signs that small banks that have raised interest rates have gained significantly. 

Since the deregulation of savings deposit interest rate in October 2011, five private banks, 10 foreign banks and a co-operative bank have increased their savings deposit rate in the range of 100-500 basis points so far, according to RBI data. These banks have increased their share of savings bank deposits in the banking system from 1.8% to 2.1% in the post-deregulation period up to July 2012. 

Neither large PSU banks like the SBI nor private lenders such as HDFC Bank and ICICI Bank have revised rates from 4%, which was mandated earlier. All these large banks say that they have not lost out on deposits. 

Banks may shed Rs 300,000 crores in bulk deposits

http://www.business-standard.com/india/news/banks-may-shed-rs-3-lakh-cr-in-bulk-deposits/484547/

With the government driving banks to reduce dependence on wholesale funds, public sector banks (PSBs) may shed bulk deposits worth Rs 3,00,000 crore ($55 billion) over the next few quarters, according to estimates of Deutsche Bank Securities.

While banks had begun task (to prune bulk deposits) in earnest, the move was fraught with challenges, said public sector bank executives. First, the immediate replacement of bulk money with low-cost funds — current and savings account (Casa) deposits and term deposits is tough. Second, cutting down bulk money might moderate the pace of overall deposits’ mobilisation, a situation banking regulator may not be happy with.

Analysts said this move (fall in bulk deposits) would further moderate the deposit growth. The RBI data show annual deposit growth slowed to 14.3 per cent in August 2012, from 17.4 per cent in March 2012. A senior executive with a Kolkata-based public sector lender said though retail deposits were definitely less volatile, banks would have to continue to give attractive rates to get money. Plus, the change in profile of deposits composition is a gradual process.

IDBI Bank rolls out floating rate term deposit

http://www.thehindubusinessline.com/industry-and-economy/banking/article3807560.ece

IDBI Bank has launched a floating interest rate retail term deposit (FRTD).

The rate of interest on the FRTD will move in tandem with a reference rate, which is the average yield at the 364-Days Treasury Bills auctions undertaken by the Reserve Bank of India (RBI) during the preceding three months.

“The interest rate in case of FRTD is anchored to a transparent, market-based rupee benchmark rate,” said the bank. The interest rate on FRTD would be reset every calendar quarter.

The minimum amount of deposit under FRTD will be Rs 10,000 and thereafter in multiples of Rs 1,000 with a cap of Rs 1 crore. The FRTD would have a lock-in period of one year and would be accepted in six maturity slabs, ranging from one year to ten years.

Bihar Govt not to deposit funds in 21 banks

http://www.thehindubusinessline.com/industry-and-economy/banking/article3803402.ece

Bihar government has decided against depositing funds in 21 public and private sector banks for their failure to provide loans to borrowers on the four-point criteria, Deputy Chief Minister Sushil Kumar Modi said today.

These 21 banks, including Axis Bank and ICICI Bank, have scored qualification marks of 25 points out of 100 fixed by the State Government to assess their performance in lending on criteria like credit deposit ratio, primary sector lending, agriculture sector lending and Kisan Credit Card, he told reporters at the sidelines of his weekly ‘Janata Durbar’.

As many as 13 banks scored zero, while the rest scored between 7 and 23 and failed to meet the State Government’s requirement on lending by the banking institutions to the borrowers in Bihar in 2011-12, he said.

The State Government had, therefore, decided against making deposits in these 21 banks till further orders and to withdraw its funds from these banks, Sushil Kumar Modi, who also holds the Finance portfolio, said.