The Hindu Business Line : Banks on bulk deposits chase

Mumbai, March 12 Banks are scouting for short-term bulk deposits and are prepared to pay a higher rate to shore up their balance sheet by the end of the fiscal. The rates for bulk deposits of Rs 50 crore and above range from 10 to 10.5 per cent, said top bank officials.

“This time of the year banks run around for resources to meet the March 31 deadline. Known as ‘window dressing’ of books, banks typically raise funds by offering high deposit rates,” said a bank official.

While this year the rates on retail deposits have not gone up, the rates on bulk deposits of over Rs 50 crore have gone up above 10 per cent, said the official.

A leading public sector bank official said, “Unlike last year, rates have not touched 11 per cent. But banks have to meet their deposit targets and the targets set by the government (in the case of public sector banks). So they are willing to pay a higher price for the funds in the short term.”

Margin pressure

Such high rates would definitely put pressure on banks’ margins. But growth in size would mean having to sacrifice margins, said Ms Chandana Jha, banking analyst with PINC Research. “Margins are already down and for many mid-sized banks CASA (low cost current account and savings account) is either static or in the negative,” she said.

With most banks having cut down lending rates in the fourth quarter, it will put further pressure on margins, she added.

But what is surprising this year is that even with sufficient liquidity in the market, banks are offering such high interest rates.

“It is surprising because liquidity is ample. Call rates are around 6 per cent. But 15-days and one-month money is quoting at over 10 per cent,” said an official with a public sector bank.

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