BOI hikes rates on bulk deposits
Public sector lender Bank of India (BoI) raised interest rates on select bulk deposits on Thursday, to retain its deposit base even as the government wants all public sector banks to cut their bulk deposit portion to 15% of total deposits by March end.
BoI raised interest rates on deposits worth R10 crore and above by 25 basis points to 9%. In a notification to the stock exchange, the bank said it has raised rates on bulk deposits which fall in the maturity period ranging from one year and above to less than two years.
“Some of our high cost deposits are maturing soon and we wanted them to retain their deposits with us. Many private sector banks are offering 9-9.2% in these maturities, so we wanted to get closer to the market rate,” said a senior official at the bank on request of anonymity.
However, the official also said the bank is not very confident of retaining their bulk deposits even at these rates.
In July this year, the finance ministry had issued a circular to the state-run banks asking them to cap bulk deposits at 15%, which included 10% of deposits above the card rate and 5% of certificates of deposits (CDs). Financial services secretary DK Mittal had said large amount of bulk deposits is a risk to the banking system. The move was aimed at improving PSB’s asset-liability management. It also followed rush for these high-cost
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