The Hindu Business Line : ‘Existing rate structure cannot be sustained’

Kolkata, June 16 The existing interest rate structure cannot be sustained for long as it would lead to a squeeze on the margins of banks, said Mr P.K. Gupta, Chairman and Managing Director, United Bank of India.

According to him, though the poor credit offtake did not warranty a rate hike, banks would find it difficult to continue with the existing rate structure, as that would have a negative impact on their net interest margin. “It is becoming increasingly difficult to maintain the existing interest rate structure, it will soon start affecting our margins,” he said, speaking to newspersons on the sidelines of the FICCI Banking Conclave 2008, here, on Monday.

United Bank plans to realign interest rate on certain advances, which were below PLR. The bank has also increased the deposit rates on certain maturities in order to bring it at par with the industry, said Mr Gupta.

Interest rate on deposits of one year-to-less than two years has been increased by 50 basis points at 8.50 per cent, two-to-less than three years by 75 basis points at 8.75 per cent and that on three-to-less than five years by 25 basis points at 8.50 per cent.

The bank has however, left the PLR unchanged. “Though we have left the PLR unchanged, we need to see how long we can sustain this,” he said.

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