Cash-rich public sector enterprises? bottom line will be getting a leg-up in the current quarter from interest income as they have struck lucrative deals with banks for higher rates to park the money with them. With combined cash reserves of over Rs 1 lakh crore with them, public sector behemoths like BSNL, NMDC, NTPC, Power Grid and Coal India have prevailed upon the banks to offer rates higher than the card rates (rates offered to retail investors), money market dealers said.
In last one-and-a-half-years on account of the loose monetary policy followed by the central bank, lenders have been discouraging bulk deposits and have not offered rates above card rates. But with current liquidity crunch (caused by advance tax outflows and loans to telecom companies to pay for 3G airwaves), the cash-strapped banks may continue to offer rates above card rates to attract bulk deposits at least till the end of the month.
With cash surplus of more than Rs 35,000 crore on their books, BSNL stands to benefit most from the hardening bulk deposit rates.
?The government spending can take place only over a period of time. The key triggers that can ease the liquidity crunch in short term is prepayment of loans by telecom companies with money raised from overseas. A clearer picture on this should emerge in another week,? said Namrata Padhye, fixed income analyst at IDBI Gilts. If the credit offtake shows signs of strong revival, the banks will become more aggressive in picking up bulk deposits at a wider spread over the card rates.
October 2008 had seen a spread of above two percentage points between the card rate and bulk deposit rates. Current card rates on one year deposits varies between 6.25% to 7% and is expected to move up further as the rate hikes transmit through the system. ?Some banks have started offering rates above the card rates (interest rates offered to retail depositors) in recent weeks to mobilise bulk deposits. But it will take some time to see any sharp spread between the card rate and the rates offered to these public sector enterprises,? said a senior official looking after the Union bank?s government business.