Bombay Dyeing Cuts Fd Rates

Bombay Dyeing has cut interest rates on its fixed deposit (FD) programme by three percentage points from 15 per cent to 12 per cent. The new rates, which is applicable to FDs of all maturities -- from 12 months to 36 months -- will be effective from May 5.

Sources at Bombay Dyeing said from May 5, the prevailing rate will be 12 per cent instead of 15 per cent. "The liquidity position has eased and the cost of funds has gone down. We don't want to keep borrowing at high rates," the sources said.

Though FDs are not a major source of funds for Bombay Dyeing, the rate cut is a signal that in a scenario of declining lending rates, corporates will try to reduce borrowing costs and concentrate more on cheaper sources of funds. Bombay Dyeing mobilised Rs 30 crore from fixed deposits in 1995-96.

"The new rates are certainly not attractive. If people want to take their money back, they are welcome to do so. But we have decided on this course after taking into account the other sources of finance like bank overdraft, packing credit, commercial paper and foreign currency loans," the sources said.

Though the previous rate of the company's FD programme was 15 per cent, the eventual cost was nearly 16 per cent. At the new rates the cost of funds would be 13 per cent, the sources said adding that the strategy is to get out of high-cost funds.

In fact, most short-term deposit programmes offer lower rates. Commercial paper for 90 days is available at 11 per cent while the interest rate for 30-day paper is 9 per cent. The rate of interest under packing credit for exporters, which Bombay Dyeing resorts, is at 13 per cent. Foreign currency borrowings, too, are available in the range of 7-8 per cent interest.