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PSU banks to slash interest rates on deposits

PSU banks to slash interest rates on deposits

PSU banks are likely to slash deposit rates on both retail and bulk deposits.

New Delhi: The PSU banks are likely to slash the deposit rates on both retail deposits and bulk amounts (Rs 15 lakh and above) within a year. Some PSU banks have already cut the bulk deposit rates by 2 percentage points and may lower it further.

MBN Rao, CMD, Canara Bank told CNBC-TV18 that the bank is examining lowering deposit rates on retail deposits soon. He sees a 50 basis points reduction in deposit rates up to one-year. Corporate rates may also come down substantially.

"In respect of liability and deposit rates, sometime during the course of the week our Asset-Liability Management Committee, will meet and take a look at our deposit rate structure," said Rao.

However, he expects interest rates to be stable-to-soft in the near-term. "In case of the deposit rates up to one year, there maybe a 50 per cent reduction. The longer deposit rates especially the corporate rates may come down substantially compared to the peak levels; that we have seen before March. The rates or the bulk deposits have come down from the historical peak of about 12 per cent to around 9 per cent," he said.

Banks have been examining to lower deposit rates-as in the recent past, the inflation has come down and the inter-bank call money rates have been hovering low.

While the one-year deposit rates are likely to stabilise given that inflation is at fourteen-month low for the tenth consecutive week, the long-term interest rates on deposits are likely to show a bit of a downward movement, said Rao.
first published:July 11, 2007, 00:22 IST