PSBs, pvt banks use different routes to attract deposits

Mumbai, July 30 | Updated: Jul 31 2006, 06:12am hrs
Foreign, private sector and public sector banks are seen adopting contrasting practices to enhance their deposit base. While foreign and private sector banks are paying hefty interest rates for mobilising short-term (one-year) deposits, PSBs are paying such rates only for long-term (8-10 year) plans.

The deposit rates of PSBs are moving up in tandem with their tenures, whereas most private and foreign banks seem to be discouraging medium- and long-tenure deposits by paying lower interest rates for deposits over 13 months compared with their short-term rates.

A foreign player like HSBC currently pays 7.5% for its 400-day fixed deposit scheme, while the interest rates for 401 days to 18 months are as low as 6.75%. In the private sector, ICICI Bank offers an interest rate of 8% for a 390-day deposit, while for the tenure of 391 days to two years, the bank offers an interest rate of 6.75%.

On the other hand, a public sector player like Bank of India has a scheme where it offers an 8% interest rate for the long-tenure (8 to 10 years) deposit. Even Union Bank of India has recently launched a scheme, offering an 8% interest rate for 8-year and 9-month deposits.