Bulk deposit rates to ease from April: SBI official

The interest rates on big-ticket deposits may ease from April on the back of improvement in liquidity and fall in credit demand during early months of financial year 2011-12, according to a State Bank of India (SBI) official.

With tight liquidity, banks have raised substantial amount through certificate of deposits and short-term bulk deposits by offering high interest rates. The short-term deposit rates for bulk deposits have ruled above 10 per cent.

Short-term interest rates have remained stable for the last few days. If the credit growth does not show frenzy (around close of financial year 2010-11), rates will not rise. The credit off-take is slow in the beginning of the new financial year and deposit rates may ease from April, SBI Managing Director, R Sridharan, told reporters on the sidelines of a convention on financial regulations.

The pace of deposit growth has lagged credit growth, putting strain on resources. Banks have raised deposit rates across maturities by at least 200 basis points via three-four rounds to attract funds from retail and institutional clients.

According to the Reserve Bank of India data, commercial banks raised Rs 5,91,026 crore till February-end in financial year 2010-11. The pace of deposit growth improved to 13.2 per cent by February-end, as against10.2 per cent in October-end last year.

Source: Business Standard