Cash in on higher rates on short-term deposits

G. Naga Sridhar Updated - March 12, 2018 at 05:28 PM.

Banks are making ‘limited period' offers to tide over the liquidity crunch

If you have some funds, this is the right time to make a quick buck. Banks are competing to tap short-term deposits offering, perhaps, the highest-ever rate of interest. Interest on deposits up to one year for Rs 15 lakh to Rs 1 crore is between 9 per cent and 10.50 per cent. Senior citizens get 50 basis points more.

A customer gains due to greater flexibility — ‘high returns and full liquidity', an advertisement of SBI claims. The bank has even put a minimum term of as low as seven days for withdrawal without any premature closing charges. The no penalty for premature closer extends from 15 to 180 days with several banks.

WHY NOW?

While high rates on term deposits are not uncommon during the fourth quarter, the reasons this year are different, say experts. “The deposit growth this year has dropped below credit growth compared to last year, which partly explains this last minute rush,” Mr Shiv Kumar, Managing Director, State Bank of Bikaner and Jaipur, told

Business Line .

Till December 31, 2011, the deposit growth for banks was 16 per cent compared with 20 per cent last year, while the credit growth was 17 per cent.

“Actually, the Government excluded deposit and advances growth from the Statement of Intent from this year. Unlike earlier, there is no need to compensate lower deposit growth in the last one month of the financial year,” said the head of a public sector bank.

Many banks are desperate for funds now due to ‘other business' reasons, he added.

The high rates are only ‘limited period' offers' to tide over the liquidity crunch. Following today's 75 basis point cut in CRR, the liquidity situation will improve. And if any further measure is announced in the policy review on March 15, banks may re-look these ‘limited period' offers.

>nagsridhu@thehindu.co.in

Published on March 9, 2012 16:43