Banks are hard-selling fixed deposit (FD) schemes like never before to mop up funds from depositors.
While trying to stay away from high-cost bulk deposits, banks are busy advertising attractive deposit rates that are on offer, lining up roadshows and door-to-door campaigns. Some of them are even offering incentives to their employees to woo depositors.
As a result, bankers said they expect to mop up more than 20 per cent of what they usually do during November. Banks have also stepped up the deposit-mobilisation drive this month because most of them have announced that they will be reducing interest rates from December. At present, most public sector banks are offering an interest rate of around 10.50 per cent, and 11 per cent for senior citizens, on one- to three-year deposits.
“It is a matter of raising resources. We have decided to reduce interest rate on bulk deposits, which (their share in the total portfolio) are expected to come down. Most banks have decided that they will not pay over 9.5 per cent on bulk deposits,” said United Bank of India Chairman and Managing Director S C Gupta. “We will take a call if we will reduce rate of interest on retail term deposits by December so that our retail customers are not affected,” he added.
The bank had launched a special campaign called Rainbow, under which its branches are offering reward points for mobilising retail deposits. It has set a target of garnering Rs 5,000 crore of retail-term deposit by March 2009.
Last month, Allahabad Bank also kicked off its Diwali Bonanza scheme for a limited period, offering 10.5 per cent on term deposits of one to three years. Though the bank has decided to reduce rates, the scheme is still on.
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“When all our competitors were offering high interest rates, it was very difficult for us to attract retail customers. So, we were a bit late in increasing interest rates. We tried to motivate our employees to get more retail customers and started campaigns for mobilising saving accounts, term deposits and recovery,” said a senior executive at Allahabad Bank.
“During November, there is more than a normal increase in the number of fixed deposits. Next month, we will take a view on when to reduce deposit rates,” said a senior Uco Bank executive.
“People are hurrying to park funds as they expect a rate cut in December. Also, due to the financial turmoil, many people are transferring funds from private banks to public sector banks. As a result, there has been a very significant increase in the number of FDs,” a Syndicate Bank executive said.
| ON A ROLL Top ten public sector banks | ||||
| (Rs crore) | Deposits | Advances | ||
| 2007 | 2008 | 2007 | 2008 | |
| State Bank of India | 4,35,521.09 | 5,37,403.94 | 3,37,336.49 | 4,16,768.20 |
| Punjab National Bank | 1,39,859.67 | 1,66,457.23 | 96,596.52 | 1,19,501.57 |
| Canara Bank | 1,42,381.45 | 1,54,072.42 | 98,505.69 | 1,07,238.04 |
| Bank of Baroda | 1,24,915.98 | 1,52,034.13 | 83,620.87 | 1,06,701.32 |
| Bank of India | 1,19,881.74 | 1,50,011.98 | 85,115.89 | 1,13,476.33 |
| Central Bank of India | 82,776.28 | 1,10,319.67 | 51,795.47 | 72,997.43 |
| Union Bank of India | 85,180.22 | 1,03,858.65 | 62,386.43 | 74,348.29 |
| Syndicate Bank | 78,633.57 | 95,170.80 | 51,670.44 | 64,051.01 |
| Indian Overseas Bank | 68,740.41 | 84,325.58 | 47,060.29 | 60,423.84 |
| Uco Bank | 64,860.01 | 79,908.94 | 46,988.91 | 55,081.89 |
The effect of the special drive is already showing. Union Bank of India has mopped up Rs 5,000 crore through its 900-day deposit scheme, offering 10.5 per cent interest. “We closed the scheme recently, but our retail deposits have grown by over 25 per cent during the present financial year compared with 10-15 per cent in the corresponding period last year,” said S Govindan, general manager (personal Banking and operations), Union Bank of India. So far in 2008-09, the bank has mopped up Rs 11,000 crore through retail deposits.
Similarly, Bank of India’s campaign from October till the end of December to focus on retail deposits of up to Rs 15 lakh has seen it mopping up around Rs 3,000 crore so far. “We hope to add another Rs 500 crore over the next one month,” said Bank of India Executive Director B A Prabhakar.