The Telegraph
Friday , December 28 , 2012
Since 1st March, 1999
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Banks sense liquidity pinch

Mumbai, Dec. 27: A trio of banks have raised deposit rates, a sign of tight liquidity in the system.

After Dena Bank and Federal Bank, state-owned Bank of India (BoI) today hiked the interest rate on deposits of Rs 10 crore and above by 0.25 per cent.

Banks are resorting to deposit rate hikes to bring in funds and overcome the liquidity shortage.

Under BoI’s revised slab, the bank will pay 9 per cent on a deposit of Rs 10 crore and above for the timeframe of 1 year and above to less than 2 years, up from the earlier 8.75 per cent. The new rate will be applicable from today.

The latest increase comes a couple of days after Dena Bank and private lender Federal Bank revised their deposit rates. Dena Bank hiked the rates for deposits of 365 days and up to one year and deposits above one year to less than two years to 9.1 per cent from 8.75 per cent.

Federal Bank raised the deposit rate by 25 basis points in the 1-3 year maturity bucket to 9 per cent.

Commercial banks have been borrowing more than Rs 1 trillion daily from the Reserve Bank of India’s repo window over the last one month.