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Wednesday, Oct 30, 2002

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Depositors at the receiving end

Our Bureau

MUMBAI, Oct. 29

BANKS seem to have rebuffed the Reserve Bank of India's good intention to bring down interest cost in the economy. Instead, banks have chopped deposit rates, dumping the common man on the street.

Leading off the bank brigade is the State Bank of India which cut deposit rates by 50 basis points effective November 1 while sitting on an immediate drop in lending rates.

Senior citizens are likely to earn less on their deposits with the bank slashing deposit rates by around 25 basis points.

Mr Janki Ballabh, Chairman, SBI, told Business Line, the top brass would meet over the week to finalise on lending rates. Perhaps, SBI will have to wait for a new chairman as Mr Ballabh retires on October 31.

Bank of Baroda followed suit, dropping deposit rates in the three-year bracket by 25 basis points. The bank had cut deposit rates by 25 basis points in the one to two year categories a week prior to the credit policy.

"Our asset liability committee will meet later this week. Our inclination is to cut lending rates'', according to Mr P.S. Shenoy, Chairman and Managing Director, Bank of Baroda.

Central Bank of India has decided to drop PLR by one percentage point in two tranches. Immediately, PLR will come down from 12 per cent to 11.50 per cent and going down further to 11 per cent in three months.

The bank will also reduce deposit rates, particularly in the longer tenor fixed deposits by around 50 basis points. Variable interest rate deposits are being retained at their present levels.

Bank of India's asset liability committee will be meeting tomorrow to review its lending and deposit rates.

"We are yet to take a decision. Although the credit policy is along expected lines, the savings rate has been left untouched and will put pressure on margins.

"There is not much scope for a deposit rate cut, although there might be a token reduction'', said Mr O.N. Singh, Executive Director, Bank of India.

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