L & T, Bajaj, M & M Arms Get Nod To Fix Deposit Rates

The finance arms of three major corporate houses "" Bajaj Auto, Mahindra and Mahindra and Larsen & Toubro "" have been given the freedom to raise deposit with any ceiling and offer interest rates with a cap.

The Reserve Bank of India in its first list gave 10 finance companies freedom on the interest rate and deposit ceiling. Six companies got their okays last week and another four this week.

According to industry sources, the finance arms of corporates to get the freedom this week are Bajaj Auto Finance, Mahindra and Mahindra Finance and L&T Finance. Alta Finance and Leasing also got an approval. 20th Century Finance Corporation, Apple Industries, Anagram Finance, Reliance Capital, PAL Credit and IIT Financial Services were earlier accorded the certificate for removal of interest rate cap and freedom on deposit raising limits. The RBI is expected to release another lot of names in ten days.

 

While Reliance Capital has declared the rates that it will offer on its fixed deposits, others are yet to take a decision on the some.

Reliance Capital is offering 15 per cent for one year, 16 per cent for two years, 18 per cent for three years, 19 per cent for four year and 20 per cent for five years. Most of the companies have been adopting a 'wait-and-watch' attitude towards the extent of the increase. Finance companies will see a squeeze in margins if the deposit rates are hiked substantially. Alternatively, to maintain the spread, finance companies will earn higher by giving risker loans. This will increase the risk on the portfolio of finance companies.