Banks started pulling off high-return FD schemes

Interest rates have started suspending therefore banks have also started taking off the special deposit schemes under which they were offering higher interest rates. For instance Union Bank of India (UBI) recently has taken a decision to withdraw its 900-day deposit scheme with 10.5% interest rate from next week. Other banks to follow suit soon.

UCO Bank sources said that banks deposit scheme under which it is offering 10.5% on exact one-year deposits will be only for the festive season. UBI on the other hand has withdrawn its one-year deposit from November 1 even though it has raised deposit rates.

Banks have introduced ‘special’ schemes under which they were giving high interest rates than the rates attached on regular deposits on either side of the special term.

From all the concerned quarters the indications are coming that the interest rates on deposits in general will slip down from their current high levels. Therefore if you are still looking for a safe option for investing your liquid cash then this is probably the best time to invest your funds with bank fixed deposits.

Hence you might not get interest rates which are as good as 10.5% per annum on long deposits. “We will reduce deposit rates with effect from November 9. We have decided to withdraw the 900-day scheme on which we offer 10.5% rate per annum.

There will be no change in deposit rates for other time buckets,” UBI chairman and managing director MV Nair said. According to him, UBI has collected Rs 4,000 crore through this single-deposit instrument during the past one month.

For the moment, State Bank of India is yet to take a decision on deposit rates. Other top banks, in principle, have agreed to reduce their rates. They have gone back to their drawing boards to finalize the extent of the reduction and the timings for the same.

Some of the banks like Allahabad Bank, Bank of India, UBI, and UCO Bank recently raised their deposit rates. But they, too, have started considering realigning their plans with the market.

UCO Bank CMD SK Goel said: “We will take a decision on rates on November 10. By then, the real impact of Reserve Bank of India’s liquidity infusion doses will be clear.”

UBI executive director TM Bhasin said: “After RBI’s signal to lower interest rates in general, our deposit rates have to be corrected now.” It has reduced its lending rates to all advances linked with prime lending rate. The bank added: “More reductions in lending rates will be considered commensuration with decrease in deposit rate in the next week.”