Union Bank hikes deposit rates by 25-75 bps

Union Bank of India (UBI) today raised its deposit rates by 25-75 basis points across various maturities to attract more retail depositors for bridging the resources-credit growth gap.

M V Nair, chairman of the bank, said: "the bank has to raise funds to keep pace with the growth in advances. There is also a need to give better returns in the light of competition for resource mobilisation."

The bank also has no leeway in using statutory liquidity ratio (SLR)
investments to fund credit expansion as its SLR holdings at 25.6%
are close to the minimum required, i.e. 25%. Its excess SLR holdings have fallen to Rs 500 crore from Rs 3,000 crore about six months ago.

The hike is larger for longer term deposits while it is smaller for short
duration deposits. The bank is offering 25 basis points higher for deposits
of 91-171 days at 5.25%, 50 basis points more for deposits of 1-3
years at 6.50% and 75 basis points for deposits over 5 years at 7%.

At present, Centurion Bank of Punjab offers the highest rate of 8% on term deposits with maturity period of five years and above.

Union Bank's total deposits grew by 19.83% to Rs 74,094 crore in
2005-06 from Rs 61,831 crore a year ago, while its credit portfolio rose by 32.94% to Rs 54,644 crore in 2005-06 from Rs 41,103 crore a year
ago.