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Our Bureau

Chennai, Oct. 6 Banks seem to have been in some kind of liquidity crunch in the recent past. That’s why they have tried to attract more deposits into their coffers, hiking interest rates during the last one week.

Banks have also been pushing a number of ‘special’ deposit schemes. These schemes offer a slightly higher rate. It is marketed as a deposit for a certain number of days — say 500 or 900 or 1,000 ‘days’. The idea behind such a deposit is to tide over the current liquidity problems without being saddled with high cost deposits for a longer period of time.

Earlier, banks were known to occasionally offer such rates for much shorter term deposits (anything less than 6 months) when the need for immediate liquidity was pressing. But the duration of deposits has gradually increased and today banks take on deposits at higher rates even for what would be called medium-term.

The State Bank of India, the country’s top bank, offers an interest rate of 10.50 per cent for deposits of 1,000 days. Of course senior citizens get an extra 0.5 per cent. The bank has tried to make this special term deposit attractive by offering a rate that is higher than what it would offer for a 3-year (or 1,095 days) deposit by almost 1 percentage point.

Every bank has its own favourite term period (see table).

Among the few that displayed a contrarian trend in not hiking rates was UCO Bank. The bank which revised its rates a little over a fortnight ago had cut rates on deposits of between 0.60 per cent and 0.90 per cent across maturities of 91 days to one-year period.

More Stories on : Fixed Deposits

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