ICICI, Union Bank jack up deposit rates

ICICI Bank, the country's second largest bank, and state-run Union Bank of India today set the ball rolling for industry wide rise in interest rates again in just over a month.

ICICI Bank has raised deposit rates by 25-150 basis points across maturities, while Union Bank increased its deposit rates by 25-80 basis points. This follows a 25-75 basis points increase in deposit rates across the banking sector in mid-December 2006.

The increase in deposit rates last month happened along with an increase in lending rates. ICICI Bank officials had last week stated that any increase in cost of funds would result in an increase in lending rates.

ICICI Bank has introduced an 890-day deposit offering 9 per cent interest, while Union Bank will be offering 8.30 on a 366-day deposit.

Maninder Singh Juneja, head- retail liabilities, ICICI Bank, said "The bank has increasingly observed keen interest among customers to invest in deposit products. The deposit schemes launched this year have received a great response and we believe that this trend will continue."

ICICI Bank said its 890-day fixed deposit offers a very attractive rate of 9 per cent and bears one of the highest yields in the market.

ICICI Bank had raised its prime lending rate by 50 basis points on December 14, a week after the Reserve Bank of India (RBI) sucked out Rs 13,500 crore from the banking system by raising the cash reserve ratio (CRR) by 50 basis points.