Oriental Bank of Commerce likely to cut 1-yr deposit rates

Written by fe Bureau | New Delhi | Updated: Mar 31 2009, 05:50am hrs
Public sector lender Oriental Bank of Commerce (OBC) is likely to slash interest rates on one-year deposits by up to 50 basis points (BPS) on Tuesday, a move that will realign them with lending rates that were cut last week.

Our Asset Liability Committee (Alco) will meet on Tuesday. In the light of reduction in lending rates, we would consider a 25-50 bps cut in interest payable on deposits for one year, OBCs executive director S C Sinha told reporters here on Monday.

The bank pays interest at 8.25% on one-year deposits of less than Rs 1 crore and 7.5% on Rs 1 crore. According to the proposal before the Alco, the new rates would be effective from April 1, 2009.

The bank is expecting a 25% growth in deposits and 24% in credit for the current fiscal. Deposits in the current account savings account have grown 22% till now and they are likely to grow 24% for the entire fiscal, he said. OBC shares closed 5.03% lower at Rs 113.25 on the Bombay Stock Exchange.

Next year, Sinha said, growth in deposits would drop due to the economic slowdown and result in less jobs and salary cuts. People are expected to save less in banks, he added. However, credit disbursal by the bank should not be less than 22-23%, Sinha said. The net interest margin would be flat at 2.5%.

On the requirement of more funds, Sinha said the bank has sufficient capital till September this year. OBC had raised Rs 500 crore through upper Tier II bonds in February. It has a capital base of Rs 7,000 crore.