The Hindu Business Line : Vijaya Bank to shed high-cost deposits

Chennai, June 4 Around Rs 2,000 crore of high cost deposits with Vijaya Bank, carrying an average interest rate of 9.6 per cent, are maturing this month and the bank is going to say ‘no’ to any renewal requests.

“We will not renew any of those deposits at a rate more than 8.5 per cent,” the bank’s Chairman and Managing Director, Mr Prakash P. Mallya, told Business Line.

Around a fourth of the bank’s Rs 48,000-crore deposits are ‘high-cost’. This would come down to 18 per cent by March 2009, he said. High cost deposits were raised in the last few years so as to be armed with adequate resources to seize lending opportunities.

The bank’s credit grew 32 per cent last year compared with the industry average of 22 per cent. Vijaya Bank was also the second fastest growing among the 27 public sector banks, after Corporation Bank, in terms of credit growth.

But now, the bank believes it is in a position to fund its credit growth cheaper and hence the thinking in favour of retiring high cost deposits.

Answering a question, Mr Mallya said that close to 60 per cent of the bank’s advances (Rs 32,000 crore) are below-Prime Lending Rate (PLR).

(Technically, PLR is the rate at which a bank would lend to its best customers and therefore represents its best rate.) Mr Mallya, however, pointed out that the bank’s average yield on advances worked out to a comfortable 10.4 per cent.

Mr Mallya said that Vijaya Bank could raise Rs 3,600 crore in the form of both tier-I capital and tier-II capital (long-term debt).

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