Liquidity woes force banks to raise rates

Though the State Bank of India was the first to launch an aggressive deposit mobilisation scheme offering 8.5 per cent for tenures of 7-days to 180-days, other banks followed quickly.

The private sector lender Federal Bank has launched a fixed deposit scheme for retail customers that offers 9.50 per cent on a maturity period of 200 days. For one year period, the rate offered is 9.75 per cent.

The Indian Overseas Bank is also planning to raise rates for one year maturity by 25 basis points to 9.5 per cent as its CMD M Narendra said, “There is a probability that banks would offer higher rates on deposits, given the current liquidity scenario.”

Echoing on similar lines, a senior Union Bank of India official said banks may decide on increasing the short-term rate over the next 7-10 days. According to an RBI official, banks borrowed Rs 1.35 lakh crore from the central bank’s LAF on Wednesday.