RBI disapproves of differing deposit rates by banks

Sensing something amiss with lenders' retail and bulk deposit rates, the Reserve Bank has issued a directive calling on all banks to avoid offering sharply different rates on deposits with similar maturities.

"If the difference between retail and bulk deposit rates varies too much, then there is something wrong with the lenders," Reserve Bank deputy governor K C Chakrabarty said.

Chakrabarty was speaking on the sidelines of a function organised by the Centre for Advanced Financial Research and Learning (Cafral) in Mumbai.

According to industry experts, banks generally offered higher rates for bulk deposits to shore up their balance sheets. A 3-month deposit attracted 11 per cent, as against 7 per cent for a retail deposit of a similar tenure.

The RBI deputy governor has asked banks to discourage such sharply different rates on deposits on similar tenure.

RBI had hiked the short-term lending (repo) rate 13 times between October 2010 and September 2011 as it sought to fight inflation, with the repo rate increasing by 3.75 percentage points in all.