| Rays of hope
Mumbai, Feb. 18: Bank of Baroda (BoB) will raise interest rates on domestic deposits by 25-50 basis points for the second time in over a month. The hike, effective from Monday, will be applicable to all deposits in the maturity bracket of one year to less than 10 years.
BoB had raised rates on term deposits in early January by the same margin and the current round is seen as yet another indicator of rising interest rates. It is also being seen as a move by the bank to mobilise funds to satiate the rising demand for funds in an economy that is growing at over 8 per cent.
While commercial banks have witnessed a robust growth in advances that averages over 30 per cent, the rise in deposits has not kept pace.
In a notice sent to stock exchanges today, BoB said interest rates on deposits less than Rs 1 crore in the maturity bracket of one year to less than two years will now be 6.25 per cent against the earlier 5.75 per cent. Similarly, interest rates on deposits of two years to less than three years have been increased to 6.25 per cent from 6 per cent while that on three years to less than five years were raised to 6.50 per cent. The increase has been the same for deposits between five years and 10 years.
Term deposits of senior citizens would attract an additional interest rate of 1 per cent for all maturity slabs, BoB added.
The recent bout of higher rates both on deposits and advances has largely been triggered by the Reserve Bank of India (RBI) move to raise the reverse repo and the repo rates during its third-quarter review of monetary policy last month by a quarter percentage point each. Private sector banks, which have raised lending rates, have cited rising cost of funds as the prime factor responsible for their move.
Though most of the nationalised banks, unlike their counterparts in the private sector, have, so far, not jacked up lending rates, it is expected that they too will toe a similar line over the next few days.
Moody’s Investors Service has assigned a Prime-1 rating to the commercial paper issued by ICICI Bank through its $300-million fully supported commercial paper programme.