State-run banks might reduce their bulk deposit rates by 2-3 per cent in the near future following finance ministry's instruction to avoid excessive competition amongst them by offering aggressive rates to their customers.
The decision, which has been convened to PSBs through their industry body, Indian Banks Association (IBA), was aimed at creating a level playing field for mid-sized public sector banks, a top banker said.
"Normally big corporates invite bids from banks to get a higher rate for their deposits. Thus, the chances for smaller players amassing corporate deposits become narrow. (Given this), all PSBs have been asked to offer only card rates to bulk depositors," a senior public sector banker told PTI here today.
At present, many banks are offering rates in the range of 11-13 per cent for their bulk deposits over Rs 1 crore to their corporate clients, which is much above the card rates.
Finance Minister P Chidambaram had met state-run bank's heads a few days ago to discuss possible reduction on both lending and deposit rates. The Finance Minister is also understood to have asked PSB chiefs to effect a general reduction in their bulk deposit rates.
"The idea was to avoid excessive competition among state-owned banks and bring in a level playing field for smaller players," a top IBA official said.
Meanwhile, there is a concern among top PSU lenders that if they stop giving attractive rates to bulk depositors, this may cause a flight of deposits from state-run banks to private sector players who offer better rates.
