Public sector lender Bank of India on Thursday raised interest rate for bulk deposits by 50 basis points to nine per cent for one year to less than two-year tenure. Deposits of more than Rs 10 crore are known as bulk deposits. Earlier this week, old-generation private sector lender Federal Bank and state-run Dena Bank raised retail term deposit rates by 25-35 basis points. While Federal Bank increased deposit rate by 25 basis points for one to three year domestic term deposits to nine per cent, Dena Bank raised it for one year and above one year tenure to less than two years bucket by 35 basis points to 9.1 per cent.
"We have hiked the deposit rate in that particular bucket only, which is a part of asset-liability management. Some of the banks were offering nine per cent for one-year deposits, so with this move, we will also stay competitive," said M S Raghavan, executive director, Bank of India. These banks are raising deposit rates at a time when interest rates have a softer bias, with RBI widely expected to cut rates in its January policy review.
Large corporate entities having cash were opting for banks which were offering nine per cent for one year.
He, however, clarified that the bank is not offering higher than the card rate.
Earlier this year, the finance ministry has directed public sector banks not to rush for bulk deposit at higher rates. The move came after banks scrambled for cash during the last week of March to meet their yearly targets and resulted in short-term rates ( three-month deposits) crossing 12 per cent. The finance ministry had asked the banks to contain bulk deposits, including certificate of deposits at 15 per cent of total deposits. Banks that were having more than 15 per cent of their deposits as bulk deposits were asked to bring it down within a specific time frame. Following the finance ministry's directive, short-term rates have stabilised as banks refrained from offering higher rates for such deposits.