Some public sector banks are likely to approach the Finance Ministry to seek more time for compliance of the directive regarding reduction of bulk deposit.

“Some of the public sector banks are likely to approach the Finance Ministry to seek more time for complying with the norm to reduce bulk deposits to 15 per cent of total deposits,” a banking source said.

The Finance Ministry has directed the public sector banks to reduce their bulk deposits to 15 per cent of the total deposits in order to improve profitability and asset-liability management, by the end of this fiscal.

Public sector banks including Punjab and Sind Bank, Corporation Bank and Indian Overseas Bank, among others, have bulk deposits of more than 15 per cent as of now.

“Banks with higher bulk deposit cannot reduce it to 15 per cent during this period when deposit mobilisation is slow in the system,” the source added.

According to RBI data, while credit growth had grown 17.2 per cent as of July 27, deposit growth was 13.8 per cent.

The deposit growth was lower than RBI’s projection of 16 per cent for the current financial year.

To mobilise deposits, many public sector banks, including Bank of Baroda and Central Bank of India, have increased deposit rates on long-term tenors.

(This article was published on August 19, 2012)
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