Dhanlaxmi Bank hikes deposit rates

Private sector lender Dhanlaxmi Bank has announced a hike in the deposit rates across various maturities. The bank has hiked the deposit rates by a maximum of 3 percent.

The head of banks branch banking and NRI Businesses Mr. Salil Datar said "The hike in interest rates is in line with market trends and the emerging market interest rate scenario."

After the hike, the deposits for the maturity period 46 to 90 days will attract an interest of 9 percent and on deposit for maturity period of 91 to 179 days the customers will earn an interest rate of 8.75 percent compared to 7.25 percent.

Deposit rates expected to rise by 100 basis points this year

According to a study conducted by Care Ratings, the banks in India might have to raise the fixed deposit rates by around 100 basis percent or 1 percent in the next one year.

According to the study “The banking sector has to garner 41 per cent more money in the form of new deposits in CY2011 than what they had done in CY2010 to maintain the credit growth momentum…..This would put upward pressure on the interest rates offered on deposits.”

The commodity prices and spending on infrastructure is expected to rise further this year and it will keep the banks under continuous pressure.

The agency also expects that to ease the liquidity situation the banking regulators might have to cut the cash-reserve ratio by more than 200-250 basis points.

Hike in deposit rates of Dhanlaxmi Bank

Dhanlaxmi Bank , a leading South Indian private sector bank has announced a hike in fixed deposit rates. The bank raised the deposit rates by up to 50 basis points or 0.50 percent over various maturities on deposits between Rs 15 lacs to 1 crore.

Earlier the bank hiked the deposit rates on 20^th January 2011. A few other banks have already raised their deposit rates in reaction to the announcement of the tightening of the monetary policy by The Reserve Bank of India.

The new rates are in effect from today itself.

Banks to levy on premature withdrawal of F.D

The banks are planning to impose fine on the premature withdrawal of the fixed deposits. Most of the banks are considering the proposal for implementation. Earlier there was no such penalty on premature withdrawal of the fixed deposits.

There are some public sector banks that have already started to levy on premature withdrawal but the private sector banks were tolerating the practice in order to attract more and more customers to invest with their bank.

For past few months the deposit rates are on a constant rise and that is why there has been a sudden rise in the premature withdrawal of the fixed deposits. Continuous migration of the investors is creating a lot of problem for the banks as such acts were putting unnecessary pressure on the liquidity position of the banks.

Hence, private sector banks have also started taking the situation very seriously . Pioneering the trend in the private sector bank HDFC Bank announced to levy 1 percent interest rate on premature withdrawals.

IDBI Bank also announced new guidelines for the same. The bank announced to impose 1 percent penalty on the withdrawal of the term deposit opened on or after 1 January 2011 however it gave relaxation to the customers that opened deposit account before January 1, 2011.
IDBI Bank said in a statement "Interest payable on prematurely withdrawn deposits will be the contracted rate or the rate applicable for which the deposit remained with the Bank, whichever is lower, less 1 per cent penalty."

South Indian Bank raises deposit rates

The Thrissur based South Indian Bank has raised the deposit rates across various maturities. Earlier the bank revised the deposit rates on 4^th September last year.

Such a move was very much expected from the bank ,as all the other banks are consistently increasing their deposit rates in order to attract more and more customers so that their deposits could rise. Apart from this, the bank is offering an additional 0.50 interest rate to the senior citizens across all the maturities .

The new deposit rates are in effect from 24^th January.

Preclosure penalty on FD from HDFC

Like other banks HDFC Bank has also decided to impose a penalty on the premature withdrawal of the money from the fixed deposit scheme. Earlier the bank did not used to impose any penalty for the purpose . Regarding the matter the issued a statement stating “As per the terms and conditions of fixed deposit accounts of the bank, the penalty on premature closure of FDs, including sweep-in and partial closures has been fixed by the bank at the rate of 1%. This will be applicable with effect from 24th January 2011.”

Most f the private sector banks impose a penalty on the premature withdrawal of money from the fixed deposit scheme on the other hand some banks like Axis Bank and IDBI Bank stand firm on their decision to not to impose any penalty on premature withdrawal.

Executive Director and CFO of Axis Bank Mr Somnath Sengupta said “We do not have any penalty for premature withdrawal . However, in case of premature withdrawal, the depositor will not get the interest for the original period but for the period the deposit has actually run,”

An official from HDFC Bank said that the customers that have invested in the Fixed Deposit scheme of the bank have a clear choice whether to continue with the investment with the bank or not as the amendment on the penalty will be applicable from 24^th January a day before the RBI announces the monetary policy for the third quarter.

RBI has provided customers the liberty to withdraw money before the fixed tenure however it is up to the bank if it wants to implement the penalty in premature withdrawal. According to the guidelines from RBI if the bank intends to impose penalty then the bank must make sure that the customer is made aware about the fact.

ING Vysya raises deposit rates

ING Vysya Bank has announced increase in the deposit rates across various maturities. The rates are increased by a maximum of 1 percent.

According to the new deposit rates the customers will now earn an interest of 8.75 percent on the maturity of 501-729 days against 7.75. The maturity of 201-364 days will now earn 7.75 percent and the maturity of 365-499 days will earn 8.50 percent interest rate according to the revised deposit scheme.

There has been several other revivals in the interest rates across various maturities. The new deposit rates will be effective from 14^th January.