Central Bank of India to cut deposit rates by 25 bps

Written by fe Bureau | Mumbai | Updated: Dec 11 2012, 06:00am hrs
Central Bank of India will cut term deposit rates by 25 basis points (bps) on certain buckets within a month as it looks to bring down cost of funds. The bank had cut deposit rates by 25-50 bps for a maturity of 1-3 years on ticket sizes of above R15 lakh and below R10 crore in November.

We will cut deposit rates for certain buckets by 25 bps in the next one month, Ram Sangapure, GM (retail), said.

The bank is currently offering 6.5%-8% interest on short-term deposits of 7 days to less than one year, and 8-9% for fixed deposits of over one year.

Several public and private banks have cut their interest rates on fixed deposits, following State Bank of Indias deposit rate cut of 0.5%-1% in September, to protect margin erosion as demand for credit remains subdued.

Bank credit grew by 16.46% year-on-year while the deposits were up by 13.42% y-o-y in the fortnight ended November 16. The banks disbursed new credit worth R34,771 crore in the fortnight while they lost deposits worth R25,789 crore, according to the latest data released by the Reserve Bank of India (RBI).

In September, SBI had also spurred hopes of an industry-wide base rate cut by lowering its base rate by 25 bps to 9.75%. But public and private banks have left their base rates unchanged, so far.

Sangapura said Central Bank does not want to lower its base rate of 10.50% as it will affect the entire portfolio. He also said that demand from corporate loans had not improved and the bank would focus on home and auto loan segments. Central Bank had cut interest rates on housing and other loans by up to 0.5% on September 1. The bank is currently charging interest of 10.50% on all home loans.