BoI raises deposit rates by 75-150 bps

Public-sector lender Bank of India (BOI) has increased interest rates on big-ticket (wholesale and bulk) deposits by 75-150 basis points across various maturities, effective from Thursday. Interest rates on retail domestic term deposits have also been raised by 25-50 basis points.

The maximum increase for large deposits, which cover denominations of Rs 1 crore and above, is in the 91-179 days and 270-364 days maturity buckets. While interest rates for the former were increased to 5 per cent against the earlier 3.5 per cent, the latter’s new rate is 6.5 per cent compared to 5 per cent earlier.

“The bank has revised rates keeping with the competition,” BOI Executive Director M Narendra said.

With the interest rates cycle having changed and Certificate of Deposits quoting above six per cent, the bank will review interest rates in April, after the Reserve Bank of India announces annual policy for 2010-11.

The deposit rates have earlier been raised on two accounts. First, there is a rush to garner resources before close of the financial year. Second, all banks look to retain deposits, which come up for renewal on maturity, at a time when consumer inflation is ruling in double digits.

Narendra said even after the new revisions, his bank’s rates were lower than competitors.

High cost deposits, with rate of interest above 8 per cent and worth Rs 14,440 crore, are maturing in the fourth quarter ending this month. The bank estimated high cost deposits worth Rs 15,100 crore to mature over the next 12 months.

“Bulk deposits are those which can be offered at rates above card rates with minimum denomination of Rs 10 crore. BOI was not soliciting bulk deposits at this point of time”, said a bank official, who did not wish to be named.

Bulk deposits impact net interest margin while wholesale deposits impact liquidity.

Total deposits at the end of December 2009 were Rs 2,06,002 crore with share of low cost deposits (savings and current account) at 33 per cent. The cost of deposits was 5.26 per cent at end of December 2009, down 6.11 per cent from 2008.