Kotak Mahindra Bank ups its deposit rates by 0.25 pc

"It (deposit rate hike) was partly due to the RBI's policy and partly because of the upward pressure on interest rates for some time, which has to reflect in deposit rates," the bank's Group Head-Retail Banking K V S Manian told PTI.

The hike in rates is applicable on deposits, having a maturity of over a year and is with immediate effect, the bank said in a release.

In order to check inflationary concerns, the RBI had on September 16 raised its short-term lending rate (the repo rate) by 0.25 per cent to six per cent and borrowing rate (reverse repo) by 0.50 per cent to five per cent.

After the hike, bankers had opined there would be an increase in deposit rates in the near-term which, in turn, will create pressure to hike lending rates as well.

On the liquidity position, Manian said that it was beginning to ease after the 3G, BWA and advance-tax payments. Lending rates too were poised to increase, he said, adding, "as the cost of deposits go up, lending rates are bound to go up," Manian said.

When asked about a time-frame for this, he said, "Definitely not in September, but in October you will definitely see the pressure building up and we will take a call (on revising lending rates) then."

Under the revised rate structure announced today, deposits having a maturity of over one year but until 389 days, will fetch an interest of 7.25 per cent per annum as against the earlier seven per cent while those between five-and-ten-years will attract an interest of 7.75 per cent as against the 7.50 per cent earlier, the bank said.

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