Tuesday, August 3, 2010

HDFC, Central Bank, Allahabad bank raised deposit rates

The Reserve of Bank has raised policy rates therefore banks have started raising deposit rates ranging from 25 to 75 basis points.

HDFC Bank has raised deposit rates by 75 basis points with effect from July 30, the Central Bank of India has raised rates by 50 basis points which have come into effect from August 1.

Other banks that have raised their deposit rates include Lakshmi Vilas Bank and Allahabad Bank by 50 basis points, effective from August 1.

One (1) basis point is equivalent 0.01 percentage point. State Bank of India (SBI) will be raising its deposit rates by about 0.25 per cent in August-September.

HDFC Bank has raised rates of 91 days and 6 months deposits to 5.25 per cent from 4.5 per cent, for tenors of 9 months to 1 year the rates have been revised to 6.5 per cent as against 5.75per cent.

In the coming days more banks are likely to raise their deposit rates. As the banks have started raising deposit rates therefore their cost of funds will also increase as a result the banks will raise lending rates also. Meanwhile, most of the banks are not willing to raise lending rates due to comfortable liquidity but when the credit offtake starts picking up, banks will hike lending rates in home loan, auto and commercial loan segments.

There have been indications that HDFC Bank, the mortgage major might hike the second year lending (fixed) rate by 25 basis points to 9.25 per cent. At present it is offering housing loans at 8.25 per cent fixed rate for the first year (up to March 2011) and second year at 9.0 per cent.

SBI Chairman O P Bhatt told reporters, “There is an upward bias on deposit rates. They should move up by August-September by at least 0.25 per cent.” On the other hand RBI Governor D Subbarao had said after raising short-term lending (repo) and borrowing (reverse repo) rates by 0.25 and 0.50 per cent respectively, “We expect credit to be dearer ... As credit demand picks up, we expect lending and deposit rates to go up.”

Central Bank of India Chairman & Managing Director S Sridhar said “We have lost business for not lending below the base rate of 8.0 per cent, which we were doing it earlier.” Responding to a question, he said, “As of now high cost deposit with us is zero. We have gradually reduced it over a period. We could have mobilized high cost deposits of up to Rs 5000 crore recently, which we have lost to other banks.”

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