The later hike in rates for deposits may not be a driving force for the hike in the rates for lending, financial lenders are certain of ensuring that their net premium margins (NIM), a profit measure, because of their deliberations to shed bulk deposits which are high cost.
The bulk deposits of PNB's reduced to Rs 25,540 crore throughout the September quarter from Rs 83,314 crore in the relating quarter of September of the past year. Axis Bank, Union Bank of India, Canara Bank and PNB have recently revised the deposit rates for short term deposits. The rates varied from 25 - 125 bps depending on the maturity date. While the rates hiked for deposits whose maturity date was within a year, the rates for deposits which were long term had dropped. It is anticipated that very soon some more banks would be following the same path.
The fixed deposit rates for deposits whose amount was up till Rs. 1 crore, with a maturity date between 46-120 days for Union Bank of India had gone up to 7.5%, a hike of 25 bps