Oriental Bank of Commerce revises rates on select deposits

Written by fe Bureau | Mumbai | Updated: Sep 27 2013, 17:22pm hrs
Oriental Bank of Commerce (OBC) is the latest bank to revise its interest rates on select term deposits. The deposit rate was increased by 50 basis points (bps) to 9% for deposits on more than two years and less than three years, the bank said in a filing with the Bombay Stock Exchange on Thursday.

Term deposits of less than R1 crore with maturity of 3-5 years will now earn 9.25% against the earlier 8.75%. OBC had also hiked the interest rate on certain non-resident external (NRE) deposits this week.

There is no liquidity in the system. Inflation is high, so to attract deposits, we have raised our deposit rates. Most banks are offering 9%, so we felt this hike was in line, said OBC CMD SL Bansal.

The country's largest lender, SBI, hiked deposit rates across tenures and also its base rate or minimum lending rate last week. Deposit rates were hiked by 25 bps to 100 bps across different maturities with effect from September 20.

The hike in deposit rates by most banks comes against the backdrop of tight liquidity conditions and the widening gap between credit growth and deposit growth. RBI's data for the fortnight ended September 6 showed that while credit grew at the fastest pace in over a year at 18.40% year-on-year, deposit growth remained weak and hovered around 13%. Deposits grew to R71,13,025 crore from R62,95,161 crore y-o-y in the fortnight, with time deposits up by 13.54% and demand deposits up by 7.90% y-o-y.

The pick up in credit is attributed to higher demand ahead of the festive season and an increase in working capital demand from corporates who were earlier borrowing at cheaper rates from market. However, RBI's measures to tighten domestic liquidity has pushed up market borrowing rates and made bank borrowings cheaper.