Andhra Bank hikes short-term deposit rates

Andhra Bank has raised the interest rate on the certain short-term buckets by up to 200 basis points for large-sized (read bulk) deposits. This is being done to replace deposits, which are due to mature.

"There is going to be outflow of some deposits on maturity. We want to replace them at a lower cost," said a bank official. The interest rates prevailing now are low compared with those six-month to a year ago, a bank spokesperson said from Hyderabad.

The public sector bank will offer 8 per cent on 91-119 days deposits compared with 6.50 per cent earlier and 8.50 per cent on 120-179 days deposits from 6.25 per cent earlier. The hike is applicable on deposits above Rs 1 crore in the respective tenures. The window is available only till this month-end.

He said the interest rates have peaked out and the bank does not want to commit for long term. Hence, the focus is on short-term deposits.

The total deposits rose by 33.43 per cent to Rs. 40,759 crore at end of June 2007 from Rs. 33,058 crore a year ago.

The finance ministry has, however, asked public sector banks to cut down bulk deposits and step up the share of low-cost deposits - current and savings deposits - to reduce costs.