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Tuesday, Aug 23, 2005

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Banks rejig rates to cash in on festival season

Priya Nair

Mumbai , Aug 22

IN order to take advantage of the festival season, which is typically accompanied by an increase in spending, several banks are either offering lower interest rates on retail loans or raising deposit rates. Many banks are also conducting deposit mobilisation campaigns to reach out to more customers.

Bank of Baroda (BoB) has reduced the lending rates for its housing, car and traders' loans under the retail product category with effect from August 1.

Housing loans have been reduced by 0.25 percentage points under floating rate and by 0.5 percentage points under fixed rate option for five years and above category.

Car loans have been reduced by 0.75 to 1.25 percentage points for tenures up to three years. For traders, the rate on overdraft facility is now 10.50-11 per cent. The term loans are at 10.5-11.5 per cent.

A senior official from the bank said, "We had been thinking of reducing rates for some time. It is only realignment of the rates to synchronise them with the market. In the festive season if our rates were out of sync with the market, we would be isolated. Now we are at par with most public sector banks."

By March 2006, BoB hopes to take increase the share of retail credit in its total domestic credit to 25 per cent from the current 17 per cent.

Andhra Bank has started a campaign called "AB deposit Utsave" in all its 1,200 branches and other delivery channels for mobilising deposits under its deposit schemes. The Utsave period is on from August 17 to September 17.

From July 2005 onwards the bank has also reduced interest rate on loans for female students by 0.5 per cent and is also offering a further reduction on 0.5 per cent for prompt repayment, said Mr T.R.S. Trivedi, Zonal Manager, Andhra Bank, Mumbai.

He said, "We want to give thrust for our insurance linked products and to reach out to more customers during the festival period."

The bank has also raised the rates on corporate deposits of minimum Rs 1 crore, by 0.5 per cent, up to August 31, Mr Trivedi said.

For State Bank of India deposit mobilisation is an ongoing process throughout the year, but special drives are conducted in branches during festival season, said Mr S.S. Purohit, Deputy General Manager, Mumbai, Zone II.

"Whenever people are expected to earn extra income by way of bonus or arrears, we make special drives to contact them and book business," he said.

Such drives usually last for a fortnight and special counters are set up in branches. Typically the target is to garner 50-60 per cent of the bonus amount as deposit, he added.

Dena Bank is targeting around 2 lakh savings account deposits amounting to Rs 2000 crore, through its three-month deposit mobilisation drive, from August 16 to October 16. The bank is also offering an optional insurance cover up to Rs 1 lakh on the deposits, with varying premia depending on the age of the depositor.

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