Financial Daily from THE HINDU group of publications
Sunday, Apr 30, 2006
Financial Daily from THE HINDU group of publications Sunday, Apr 30, 2006 |
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Money & Banking
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Interest Rates Industry & Economy - Economy Indian Bank, IOB to decide on rate revision soon Our Bureau
Chennai , April 29
Indian Bank and Indian Overseas Bank will be taking a call on whether to raise deposit rates as well as home loan rates shortly. Dr K.C. Chakrabarty, Chairman and Managing Director, Indian Bank, said that the Asset Liability Management Committee (ALCO), would be meeting next week and they would take a view on what to do. Mr Sivaram Swamy, General Manager, Treasury, Indian Overseas Bank, also said that the ALCO of his bank would be meeting soon to discuss the issue. Dr Chakrabarty had pointed out in an interview to Business Line a month ago that he would wait for bigger players to increase interest rates first. State Bank of India and Bank of Baroda have already announced hikes in rates with effect from May 1. PLR hike unavoidable Our Bangalore Bureau reports: Banks here have indicated that they were also likely to follow the lead set by Bank of Baroda and State Bank of India. A hike in the prime lending rates could not be averted, top officials of Canara Bank said. This was because the costs of working funds have increased during the last few weeks, triggered by the increased provisioning norms and risk weighting prescribed by the RBI. Besides, another cause of increase in rates was the increased competition from banks in attracting bulk deposits. Some of the banks were offering rates in excess of 8 per cent for short-term certificates of deposit, triggering responses among the PSU banks as well in mopping up bulk deposits. Besides, some of the bankers have already raised deposit rates during the last few weeks across all maturities. But more hikes were likely especially in the maturity spectrum of 3 years and five years, where funding requirement is critical. Any hike in the benchmark prime-lending rate (BPLR helps banks in improving their spreads and consequently their yield on assets. This was because all the existing loans were linked to the BPLR. Currently, the BPLR for Canara Bank, Vijaya Bank, Syndicate Bank and Corporation Bank is between 10.5 and 11 per cent. A reset of the BPLR in line with SBI or BoB would allow them to reprice all their loans, including the housing finance assets.
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