Oriental Bank cuts rates of 1-2 year deposit by 25 bps

Oriental Bank of Commerce on Tuesday cut deposit rates by 25 basis points on term deposits of 1-2 years maturity.

With this, OBC will from July 5 offer 9.25 per cent on term deposits of 1-2 years maturity, said Mr S. L. Bansal, Chairman and Managing Director, OBC.

Currently, term deposits of 1-2 years maturity earn 9.5 per cent a year.

Nearly 70 per cent of OBC’s total deposits portfolio falls in the 1-2 years bucket. The decision to cut deposit rate on this slab came at a meeting of asset liability committee (ALCO) today, Mr Bansal said.

This cut in deposit rate also signals that the bank may in the coming days look at reducing its lending rate too.

OBC’s base rate is currently pegged at 10.5 per cent. Base rate is the minimum lending rate below which banks cannot lend.
 

The trigger

So what has prompted OBC to cut its deposit rate for term deposits of 1-2 years now?

It could probably be due to the fact that bank’s deposits are growing at 24 per cent, while its advances are growing at 16-17 per cent per annum.

In the absence of enough number of projects for financing, the bank is often compelled to look at G-Secs for parking the surplus funds, if any.

krsrivats@thehindu.co.in