Deposit rates to climb

Major public and private sector banks may raise their deposit rates to fund the growth in credit and mobilise resources for the fourth quarter.

According to sources close to the developments, major PSU banks "" State Bank of India, Bank of Baroda, Bank of India, and Union Bank of India "" were likely to review the deposit rates for a possible upward move.

Most of these banks had also raised their deposit rates in December in response to aggressive pricing by private sector banks.

The second round is more of a cautionary move to play safe since the liquidity situation has been quite uncertain after the CRR hike made by the RBI in December.

Banks have also raised the issue with the RBI since they do not need much government securities to maintain the statutory liquidity requirement, given that deposit growth has not been very bullish.

Of late, banks have been raising one-year funds from the market at 9-9.25 per cent. Today, banks even raised 7-15 day money from mutual funds at 15 per cent and three-month deposits at 10 per cent.

At present, deposit rates for banks are ruling in the range of 7-8.25 per cent, whereas the prime lending rate is hovering at 11-13.75 per cent.