Public sector lender Union Bank of India increased interest rate on retail deposits, even as there is no immediate plan to hike its base rate, said D. Sarkar, Chairman and Managing Director of the bank.
“At this moment, we are not planning to raise base rate. Credit growth is not happening and we would not like to discourage borrowers at this month,” Sarkar said.
Follows others
State Bank of India and HDFC Bank earlier this month hiked their base rate by 20 basis points each to 10 per cent. Union Bank’s base rate is at 10.25 per cent.
Union Bank hiked rates on deposits up to Rs 1 crore for the period 46 to 120 days by 25 bps to 7.50 per cent.
Similarly, in the slab of 31 to 45 days, interest rate increased by 125 bps to 6 per cent (from 5.75 per cent). It also reduced the interest rate on deposit for 5 to 7 years maturity by 25 bps
The revised rate is effective from Monday . The move is intended to increase the retail term deposit base of the bank.
Capital raising
Sarkar also said the capital infusion of Rs 500 crore on behalf of the government, will increase Union Bank’s capital adequacy ratio (CAR) by 100 bps.
The bank’s CAR in the September quarter stood at 9.72 per cent with a tier-I capital of 7.11 per cent as compared with CAR of 9.92 per cent (tier I of 7.21 per cent) in the corresponding September quarter of last year.
During this quarter, the bank is also expected to raise Rs 2,000 crore as long-term bonds in form of tier II capital from the debt market.