UCO Bank is unlikely to revise its lending and deposit rates before the Reserve Bank of India's (RBI) third quarter review of monetary policy on January 29.
"There is tightness in the liquidity. Hence, deposit rates are staying firm. We will wait for signals from RBI on the direction of interest rates. We are unlikely to revise our rates before the monetary policy," S Chandrasekharan, executive director of UCO Bank, told reporters here on Saturday.
Earlier this week, HDFC Bank reduced its base rate or minimum lending rate by 10 basis points to 9.7 per cent. But most banks have maintained the status quo on their rates despite demand for rate cuts to revive slowing growth of the Indian economy.
Chandrasekharan said the bank had been reducing its dependence on bulk deposits and focusing on mobilisation of low-cost deposits to keep its cost of funds under control.
He was confident that the state-run lender would be able to reduce its share of bulk deposits (including certificate of deposits) to 15 per cent by March 2014. The bank's net interest margin is expected to be around three per cent by the end of this financial year. It was 2.24 per cent during the July-September quarter.
UCO Bank witnessed 18.5 per cent rise in deposits and 14.7 per cent growth in advances in 2012. Credit growth was primarily on account of rising demand for retail loans as most companies continue to refrain from borrowing money to start new projects.
The bank expects around 20 per cent growth in its total business in the current financial year.
Chandrasekharan said the bank had not witnessed any significant deterioration in its asset quality in the October-December quarter. In the previous quarter, the bank saw its credit quality deteriorate as its loans to Sterling Biotech turned non-performing.
While Chandrasekharan declined to offer specific details, he added efforts were made to recover the money from the biotechnology firm.
UCO Bank has also requested the government for Rs 800 crore equity capital that will help the lender in keeping its tier I capital ratio above eight per cent. The bank's capital adequacy ratio was 12.27 per cent at the end of September, 2012.