Exim Bank to resume raising deposits

Banks, struggling to raise low-cost resources to meet rising credit demand, will have one more competitor for bulk deposits. Export-Import Bank of India has decided to return to the raising deposits after over a decade to keep its borrowing cost from rising.

Exim Bank chairman and managing director T C Venkat Subramanian said "even if we offer a 25 basis points higher interest rate, deposits will still be 50 to 75 basis points cheaper than money raised from the bond market."

He said the yield on a five-year bond is over 7 per cent, while a five-year term deposit carries interest rate of 6 per cent or less.

Exim Bank plans to utilise the services of non-bank wealth management advisors like DSP Merrill Lynch to raise deposits.

The bank has budgeted a Rs 3,000 crore requirement of rupee resources for meeting the projected 25 per cent growth in its lendings in 2005-06. It also plans to raise $800 million through bonds and syndicated loans overseas.

In 2003-04, Exim Bank raised a total of Rs 3,185 crore in rupee resources. It had outstanding foreign currency resources of $1.4 billion as on March 31, 2005.

Banks are already vying with each other for deposits, with credit having nearly doubled in 2004-05 to Rs 2,26,936 crore, higher than the growth in deposits.

Total bank deposits in 2004-05 were lower at Rs 2,15,220 crore compared with Rs 2,26,936 crore in 2003-04.

Exim Bank had stopped taking deposits in 1993. It can raise deposits for a minimum of 1 year and a maximum of 5 years. Subramanian said the minimum amount could be Rs 50,000, but a decision is still to be taken.

In 2004-05, Exim Bank's total equity capital increased to Rs 850 crore with the government infusing an additional Rs 200 crore. The export promotion finance institution reported a 13 per cent increase in net profit to Rs 258 crore in the year ended March 31, 2005 on income of Rs 1,104 crore.

Its sanctions increased 71 per cent to Rs 15,858 crore and disbursements rose 64 per cent to Rs 11,435 crore in 2004-05. Its loan assets were up 24 per cent to Rs 13,410 crore.