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Banks are Competing on Higher Rates on Short Term Deposits

Good news for all bank customers! Banks are competing to tap short-term deposits demand by offering higher rates of interest. Interest on deposits up to 1 year for Rs.15 lakh to Rs.1 crore is between 9% and 10.50%. For senior citizens, 50 more basis points are offered.

The reasons may be due to less deposit growth in this year which has dropped below credit growth compared to last year. Till 31st December, 2011, the deposit growth for banks was 16 percent compared to 20 percent last year. And the credit growth is 17 percent.

The new announcement by RBI about 75 basis point cut in CRR, will improve the liquidity situation. Now, banks are offering ‘limited periods’ on higher rates to tide over the liquidity crunch. And further if there are any such announcements in the policy review on March 15, banks may have a re-look into these limited period offers.