PSU banks slash short-term FD rates
FIVE major public sector banks have cut interest rates on short-term fixed deposits by 0.5-2.25% after RBI’s quarterly review of credit policy. On July 20, interest rates for fixed deposits up to one year stood at 3-9.5%, which was revised downward to 3-7.25% on August 10, minister of state for finance Pawan Kumar Bansal informed Rajya Sabha in a written reply. During the period, rates on term deposits for 1-2 years were revised from 7.5-9.5% to 7.5-9%, he said, adding that fixed deposits of over two years attracted the same interest as earlier. In its first quarterly review of credit policy for 2007-08 on July 31, RBI hiked the proportion of depositors money that commercial banks need to park with the central bank by half a per cent to curb money supply. The move was aimed to suck about Rs 16,000 crore from the market. Replying to another question, Mr Bansal said, all public sector banks put together have written off bad debts amounting to Rs 9,424 crore in 2006-07 as compared to Rs 8,832 crore in the previous year. Leading the pack, State Bank of India has written off Rs 1,397 crore, followed by Punjab National Bank (Rs 883 crore) and Oriental Bank of Commerce (Rs 777 crore). On the growth prospect of Indian banking sector, Mr Bansal said global consultancy firm McKinsey & Company in its study has projected the sector’s revenue from consumer finance at Rs 74,000 crore by 2009-10 as against Rs 28,500 crore generated in 2004-05. He allayed fears that the country was getting into an internal debt trap in response to another question. To a separate query, Mr Bansal said the government has decided to step up minority communities’ share in the priority sector lending from 9% to 15% over three years.