As banks race for deposits, they are probably being taken for a ride by corporates.

Bankers believe some corporates may be borrowing at lower rates from them against their cash credit limits and then depositing them with other banks in the form of a bulk deposits at a higher rate that earns them a cool 1 per cent. CNBC-TV18 reports.

Companies have cash credit limits with banks, the rates of which are benchmarked to PLR or to G-secs, with reset clauses. Now deposit rates change by the day, especially towards March, as banks are keen to boost their balance sheets.

To understand this with the help of an example; suppose a company, A Ltd, has Rs20 crore an unutilised cash credit limit with X Bank. A Ltd takes out a three-month loan at 9.5 per cent from X Bank, which costs him Rs47.5 lakh.

A Ltd then deposits this with a MF on a Fixed Maturity Plan, FMP, which parks with Y Bank at 10.5 per cent for 90 days.

A straight forward transaction the earns A Ltd earns Rs52.5 lakh, a cool, risk-free Rs5 lakh!.