Responding swiftly to the quarterly review of the Reserve Bank of India (RBI) monetary policy, Mumbai based Bank of India (BoI), Bangalore-based Canara Bank and Syndicate Bank have revised the rates of interest of domestic deposits. BoI has reduced its one year deposit rate by 50 basis points to 9% from 9.5% with immediate effect.
According to a BoI official, the one-year deposit category is the most popular slab among the depositors.
While Canara Bank has cut the rate of interest on its ?Canara Centenary Deposit Scheme? by 50 basis points with immediate effect, Syndicate Bank has revised downwards the interest on its domestic term deposits of tenor 400 days to less than 2 years with effect from August 1.
Canara Bank will now offer 9% rate of interest instead of 9.5% to its Centenary Deposit Scheme for a maturity period of one year.
Syndicate Bank on the other hand has revised the rate of interest on its domestic term deposits from 9.5% to 8.9% for the period 400-499 days and from 9.6% to 9% for the period 500 days to less than 2 years.
KL Gopalakrishna, executive director of Corporation Bank said: ?We have reduced the deposit rates too within the range of 1% and 1.5% recently. But we will see first how the market behaves before taking any further decision on the issue.? Kalpana Morparia, ICICI Bank?s chief strategist and communication officer, said, ?ICICI Bank will wait and watch before taking any action on the deposit rates and lending rates. We have no immediate plans.?
Bhaskar Ghose, managing director &CEO of the private sector IndusInd Bank said the lending rates may go up by 25-50 basis points, though only for short term loans. Bill discounting under letter of credit (LC) will also go up as a result of removal of reverse repo cap. However, any hopes of interest rates softening in the near-term has been ruled out with the 0.5% hike in cash reserve ratio (CRR), bankers said. Interest rates may not go up, but there won’t be any slackening either, they added.
?The CRR hike will definitely impact profitability of banks. We will have to focus on maintaining our net interest margins,? said Anil Khandelwal, Bank of Baroda’s chairman and managing director.
According to Bank of Maharashtra chairman and managing director MD Mallya, ?There is little possibility of lending rates going up as liquidity is comfortable. However, deposit rates of short maturities can come down. Cost of funds will go up and banks? net interest margins could get adversely impacted.”