Avoid sharp difference in rates on similar term deposits: RBI

RBI has asked banks to avoid offering sharply different rates on deposits with similar maturities, saying that something is wrong with lenders if their retail and bulk deposit rates vary too much.

RBI has asked banks to avoid offering sharply different rates on deposits with similar maturities, saying that something is wrong with lenders if their retail and bulk deposit rates vary too much.

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"If it (the difference between retail and bulk deposit rates) varies too much, then there is something wrong," Reserve Bank deputy governor KC Chakrabarty said.

He asked banks to discourage moves to offer sharply different rates on deposits with very little differences in maturities.

Banks offer higher rates for bulk deposits to shore up their balance sheets, say industry observers. A 3-month deposit attracts as much as 11%, while a similar tenure retail deposit gets around 7% only.

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