SBI won't accept bulk deposits for a while

MUMBAI: The country's largest lender, the State Bank of India (SBI), will temporarily step out of the bulk deposits market as it has enough funds to tide over tight liquidity in the money market.

The decision closely follows a mobilisation of 3,900 crore by SBI from retail investors, who invested in bonds launched three days ago. The total subscription for the bond issue crossed 6,000 crore on the second day with financial institutions, mutual funds, corporates and high net worth individuals putting in the rest.

Money market dealers said returns on bulk deposits would fall with SBI staying out of the market. Banks have been paying around 9.80-10% on one-year bulk deposits. "The bank appears to be comfortable with its resources position and may lie low till March," said a senior banker. Bulk deposits constitute 10% of SBI's total deposits.

The bank has begun attracting substantial funds after it raised rates to 9.25% for deposits of 1,000 days and 555 days. Besides, it can accept as much as 10,000-crore retail subscription for the ongoing bond programme.

What has also influenced the decision is the slow loan growth this quarter. SBI chairman OP Bhatt has said in January that the bank's credit growth could be 18%, lower than 20-22% as projected for the present financial year.

SBI officials said a large portion of the bank's old high-cost deposits have matured while the balance would mature by December.

Source: EconomicTimes