Vijaya Bank sheds Rs 2,000 cr of bulk deposit in Apr-Aug period

New Delhi: Bangalore-based public sector lender Vijaya Bank said it has retired around Rs 2,000 crore of bulk deposits in the first five months of the current fiscal to protect its net interest margin.

"We have shed around Rs 2,000 crore of bulk deposits in the first five months to protect our margin. This is part of our conscious effort to see that cost is contained," Vijaya Bank Executive Director Subhalakshmi Panse said.

We expect our net interest margin to be above 3 per cent during this fiscal, she added.

Banks are increasingly facing cost pressure due to high deposit rates. As high deposit rates impact net interest margin, many banks are shedding their high cost bulk deposits to protect margin.

Earlier, Bank of Maharashtra had also announced offloading its entire chunk of bulk deposits of Rs 9,000 crore by March, 2012 to control cost of deposits. Usually, banks have to pay higher rate of interest on bulk deposits than retail deposits.

Referring to credit growth, Panse said that the bank was witnessing a credit growth of around 18 per cent as of now.

She, however, said that deposit growth was little subdued during this period.

Vijaya Bank is also hopeful that asset quality will be maintained despite a hardening interest rate regime.

"Though our NPAs had increased in the first quarter of FY12 due to system monitoring of loans, we hope that asset quality will be maintained in the current fiscal," she said.

About possible base rate hike, Panse said that the bank would take a call in the last week of September whether to raise base rate in the aftermath of 25 basis points policy rate hike by the Reserve Bank of India.

Vijaya Bank registered a 58% decline in its net profit to Rs 72 crore for the first quarter ended June 30, 2011 against Rs 173.5 crore reported in the same period last year.

Total income of the bank increased to Rs 1,953 during the April-June quarter, up by 28.5 per cent from Rs 1,520 crore in the same period previous year.

Source: Financial Express