Raises short-term deposits rate by 10-50 basis points
Keeping in view the competition in the market place, IDBI Bank today kept its lending rates steady while it raised rates on short-term deposits by 10-50 basis points.
R K Bansal, executive director for retail banking, said the asset liability committee met today to review rates in the light of the Reserve Bank of India’s 25 basis point hike in repo rate. The bank decided to keep them (the loan rates) unchanged. At present, its base rate is 10 per cent and the benchmark prime lending rate (BPLR) is 14.5 per cent.
The RBI, in its mid-quarter review on June 16, had raised the repo rate by 25 basis points to 7.50 per cent to combat inflation and inflationary expectations. It was the eleventh hike since March 2010.
Another IDBI Bank official said, “With a series of key policy rate hikes, a need was felt for an upward revision, but the bank decided against raising them for now due to competitive conditions”. In May, the Mumbai-based public sector lender had hiked loan rates — the base rate and BPLR — by 50 bps, reflecting an increase in cost of funds and market conditions.
Meanwhile, the bank also restructured interest rates on education loans. The new rates are between 12.25 per cent and 12.75 per cent. For loans up to Rs 4 lakh, the interest rate was down 25 bps and for loans above Rs 7 lakh it was up by 25 bps.
It would offer a 25 basis point concession for loans to SC/ST/minority students. Another 25 basis point concession will be given to girl students from SC/ST and minority communities. On the hike in deposit rates, Bansal said the revision was at the short end. The new rate for 6 months to 269 days is 8.25 per cent (the old rate was 8.15 per cent), that for 270 days to one year is 9.0 per cent (from 8.5 per cent earlier) and that for one year to 499 days is 9.25 per cent (from 9.0 per cent earlier).
Bansal said the bank needed money in these buckets. Hence, the decision to revise rates was in line with the market conditions. At present, the bank also offers a 9.5 per cent rate on 500-day deposits. It did not tweak the interest rate for this bucket. Its cost of funds, including deposits, at the end of the quarter in March 2011 was 7.45 per cent, up from 6.86 per cent a year ago. The net interest margin improved to 2.10 per cent in the fourth quarter from 1.57 per cent a year ago.
