Personal loan lender, Union Bank of India would be increasing interest rates on deposits in October after the latest policy rate increase by RBI, according to Chairman and MD of the bank, M V Nair.
Nair said, “Right now there is about Rs.45,000 crore worth liquidity shortage and in the third quarter government security redemption would not happen as seen in the first two quarters creating further pressure on liquidity…so deposits have to keep up…if that doesn’t happen, we would see rates going up”.
The present growth rate of deposits in the banking sector is 14.5% which is much lower than the estimate of RBI of 18% increase in deposits this fiscal.
He added, “On account of inflation, savers are getting negative returns on their deposits and hence deposit growth is not happening. Going by RBI’s indication of a positive return to savers, if this trend continues, deposit rates have to go up”.
Nair said that the bank’s deposits would increase at 25% this fiscal which is more than the goal fixed by the industry.
He added, “Our loans till last week has grown at 23 percent year-on-year while deposits have gone up by 21 percent”.