SBI,
JK BANK SNIP RATES ON SHORT-TERM DEPOSITS
Riding on a sudden spurt in inflow of short-term funds from
high-networth individuals (HNIs)and private funds, banks are
reducing the interest rates on short-term deposits.
While SBI and J&K
Bank have already effected a 25 bps cut on short-term deposits
to 3.75%, a host of other public and private banks are learnt
to be planning a similar cut shortly.
Bankers said many
HNIs and funds are temporarily staying away from the capital
market due to the high volatility and are parking these funds
with banks. Hence, the sudden spurt in fund inflows for short-term
deposits.
Another reason
given by bankers for reducing the short-term rates are their
position vis-à-vis the international rates. The short-term
rates, bankers say, are still on the higher side considering
the international rates.
While wholesale
parking of funds by converting into rupees has been restricted
by bringing down rates of interest on NRE deposits, retail
level investment are still attractive. Repatriation of these
funds is not a problem as every individual can send up to
$ 25,000.
Taking advantage
of the situation, banks want to cut rates on short-term deposits
that will help them to bring down the cost of their overall
borrowings. "Short-term rates are an outcome of demand
and supply position of funds.
This is on the
higher side considering the international rates. With liquidity
comfortable, banks are trying to align this rate to a realistic
level," said K C Chakraborty, GM, BoB.
