Vizag co-operative bank hikes lending rates

After a gap of one year, the Visakhapatnam Co-operative Bank (VCB), the second largest co-operative urban bank in Andhra Pradesh, increased its lending rates by 0.5 to 1 per cent with effect from March 1.

"Although we have increased the interest rates on term deposits four times during this fiscal, we have hiked the lending rates only once to meet operational expenses," bank president Manam Anjaneyulu told Business Standard.

VCB enhanced interest rates on term deposits from 1 per cent to 2 per cent, depending on the deposit periods during this fiscal on April 28 and September 14 in 2006, and again on January 1 and March 1 in 2007.

"The move to hike interest rates, as expected, resulted in good growth in deposit mobilisation. However, this additional mobilisation has meant an increase in operational expenses. So the bank was compelled to increase interest rates on advances," Anjaneyulu said.

VCB presently offers 9.5 per cent interest on three-year term deposits and 1 per cent extra for senior citizens. At the same time, the bank charges 11.5-13 per cent interest on all types of loans. As on date, the bank's advances stood at about Rs 198 crore and it has Rs 38.8 crore reserves and Rs 16 crore as share capital.

While VCB managed to mobilise about Rs 17 crore new deposits during the entire last fiscal, the bank collected Rs 26 crore by way of new deposits by the end of March this year.

"Because of the hike in interest rates, we are expecting total deposits to touch Rs 290 crore by the end of March 2007 as against Rs 260 crore for the last corresponding period."

The bank this time is also concentrating on 'low-cost' and 'no cost' deposits. The drive has proved successful with 'low-cost' deposits rising to Rs 62 crore as against the earlier Rs 35 crore.