The Hindu Business Line : Year-end push raises bulk deposit rates up to 13.2%

Rate race
The rush to shore up deposit base resulted in bulk deposits of PSU banks swelling by 38 per cent
As much as Rs 4,36,852 crore was collected at the end of March 31, 2007

New Delhi April 21 Big money can get huge returns even if it is parked in a no-risk deposit with a public sector bank. According to statistics available with the Ministry of Finance, the desperate fiscal year-end lunge for deposits resulted in interest rate offer by state-owned banks for bulk deposits going as high as 13.20 per cent.

While the highest offer of 13.20 per cent during the fiscal ended March 31, 2007, was made by Punjab National Bank, all other state-owned banks paid above 11 per cent rate of interest for these deposits.

The sole exception was Indian Bank, which raised such high-cost deposits at an interest rate of 10.8 per cent.

According to senior bankers, bulk deposits that are mostly raised from corporates are generally defined as deposits of over Rs 15 lakh though individual banks have their own cut-off floor level that could range from Rs 1 crore and above. The tenor, like other deposits, could be seven days and above.

The high rate of interest offered to bulk deposits by the PSU banks is in sharp contrast to the maximum of 9-9.5 per cent offered to deposits of smaller amounts.

The year-end rush to shore up the deposit base had resulted in bulk deposits of PSU banks bloating by 38 per cent to Rs 4,36,852 crore at the end of March 31, 2007, against Rs 3,16,334 crore at the end of the previous fiscal. During the period, the aggregate deposits of the state-owned banks increased by 23 per cent from Rs 15,91,321 crore to Rs 19,59,306 crore.

According to an abridged report card on bulk deposits raised by the state-owned banks, amidst the desperate fiscal year-end lunge, seven public sector banks have managed to show a slowdown in these high-cost deposits as a proportion of their aggregate deposits at the end fiscal 2006-07 compared to the previous fiscal.

These banks include Indian Bank, whose bulk deposits as a proportion to total deposits decreased to 10 per cent from 11 per cent at the end of the previous year, Punjab National Bank 17 per cent (20 per cent), UCO Bank 34 per cent (36 per cent), Union Bank of India 22 per cent (25 per cent), State Bank of Patiala 35 per cent (37 per cent), State Bank of Saurashtra 28 per cent (31 per cent) and IDBI Bank 46 per cent (56 per cent).

State Bank of Patiala, IDBI Bank and UCO Bank, however, join four other banks that have shown an over 30 per cent increase in bulk deposits as a proportion of total deposit during the year. The others are Allahabad Bank and Andhra Bank, both with 32 per cent increase (compared to 28 per cent and 25 per cent, respectively, in the previous year), Syndicate Bank 38 per cent (24 per cent), and Vijaya Bank 31 per cent (20 per cent).

Other banks that have shown "a comparatively higher increase" percentage of bulk deposits to total deposits are Bank of Baroda 15 per cent (11 per cent), Canara Bank 30 per cent (26 per cent) Central Bank of India 20 per cent (12 per cent), Punjab and Sind Bank 11 per cent (2 per cent), United Bank of India 19 per cent (15 per cent), State Bank of Bikaner and Jaipur 25 per cent (20 per cent) and State Bank of Travancore 26 per cent (21 per cent).

More Stories on : Public Sector Banks | Fixed Deposits | Punjab National Bank

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