OBC follows in SBI footsteps, cuts short-term deposit rates to 7.5%

Written by fe Bureau | Mumbai | Updated: Oct 21 2014, 08:49am hrs
Oriental Bank of Commerce (OBC) on Monday trimmed short-term retail deposit rates, the third public sector lender after State Bank of India (SBI) and Punjab National Bank (PNB) to do so.

Deposits for a period of 46-90 days will now earn interest of 7.5%, down 50 bps. That apart, the bank has also cut interest rates for deposits less than a crore, for a period of 91-179 days by 25 bps to 8.25%.

The reduction in deposit rates by OBC can be attributed to the low demand for credit and excess liquidity available with the bank. It can also be ascribed to the muted GDP growth that the country has experienced over the last two fiscals, said Ananda Bhoumik, senior director of India Ratings and Research.

In September, the countrys largest lender, SBI, had lowered interest rates by 25 bps to 8.75% from 9% for deposits maturing between one and three years.

Speaking to a news channel, SBI chairman Arundhati Bhattacharya had said the bank had excess of liquidity and there was not enough demand to match it. Subsequently, another public sector bank, PNB, reduced rates for deposits for a period of 271 days and less than one year to 8.50%, a cut of 25 bps. Credit growth has been muted for several months now and hit decadal lows of 9.8% for the fortnight ended September 5, though it recovered to 11.15 % for the October 3 fortnight.