Avoid offering sharply different rates on term deposits: RBI

Sensing something is wrong with lenders' retail and bulk deposit rates, the Reserve Bank has directed all banks to avoid offering sharply different rates on deposits with similar maturities.

"If the difference between retail and bulk deposit rates varies too much, then there is something wrong with the lenders," Reserve Bank Deputy Governor K C Chakrabarty said.
He was speaking on the sidelines of a function organised by the Centre for Advanced Financial Research and Learning (Cafral) here yesterday.

Industry experts are of view that banks  generally offer higher rates for bulk deposits to shore up their balance sheets. A 3-month deposit attracts as much as 11 per cent, while a similar tenure retail deposit gets around 7 per cent only, they said.

The RBI Deputy Governor, therefore, asked banks to discourage such moves to offer sharply different rates on deposits with very little differences in maturities.

RBI had raised the short-term lending (repo) rate 13 times between October 2010 and September 2011 in a bid to fight inflation. In all, the repo rate was increased by 3.75 percentage points.

Recently, Finance Minister Pranab Mukherjee said the government was is expecting lower interest rates in the coming months as it looked at policy reversal by the banking regulator in the wake of moderation in inflation.

"...in coming months, we are looking at reversal in the policy rates should help in improving sentiments," Mukherjee had said in one of his post-Budget customary briefings.