BoI hikes retail deposit rates by 25-75 bps for 2-8 years

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BoI hikes retail deposit rates by 25-75 bps for 2-8 years

Public sector lender Bank of India (BoI), for the first time in 2011-12, hiked its retail deposit rates by 25-75 basis points on maturities of two years upto eight years. Moreover, the bank has also hiked its short term deposit rates by 150 to 250 bps, effective from June 1.

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Saikat Das
moneycontrol.com

Public sector lender Bank of India (BoI), for the first time in 2011-12, hiked its retail deposit rates by 25-75 basis points on maturities of two years upto eight years. Moreover, the bank has also hiked its short term deposit rates by 150 bps to 250 bps, effective from June 1.

"We hiked deposit rates to stay competitive and boost our retail deposit growth," N Seshadri, executive director, Bank of India told Moneycontrol.com.

"Growth is not happening much in retail deposit schemes for 2-5 years. We found that we were away from the market in retail term deposits above 2 years tenure. Hence, we have hiked retail deposit rates. It may not increase our cost of funds significantly. We are eyeing for 19% deposit growth in 2011-12."

The bank hiked its longer-term deposit rates only for below 15 lakh category, which typically falls under retail deposit schemes. The lender now offers 9% on maturities for 2-3 years and 1111 days, 8.50% for 3-5 years, 8.75% for 5-8 years.

The Reserve Bank of India (RBI) hiked the savings deposit rate to 4% from 3.50% in its latest monetary policy. Banks are now rushing to increase short-term to very short-term deposit rates to retain its attractiveness. They have already hiked longer-term deposit rates significantly (200-250 basis points) in the last one-year.

Recently, a slew of banks including Kotak Mahindra Bank , State Bank of India , IDBI Bank , Lakshmi Vilas Bank , and Tamil Nadu Mercantile Bank have hiked their short-term deposit rates by 25-175 bps. Joining the bandwagon, BoI too hiked its short term rates by 150-250 bps.

At 14.35 hours, BoI shares were trading at Rs 451, up 2.30%.