Banks face liquidity crunch

Banks are facing a cash shortage even after the Reserve Bank of India injected liquidity by cutting cash reserve ratio (CRR) - the portion of deposits banks require to keep with the central bank - by 0.75 percentage points earlier this month. HT reports.

Banks are facing a cash shortage even after the Reserve Bank of India injected liquidity by cutting cash reserve ratio (CRR) - the portion of deposits banks require to keep with the central bank - by 0.75 percentage points earlier this month.

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In a bid to mobilise funds Bank of Baroda (BoB), Central Bank of India, Bank of India and ING Vysya bank have increased interest rate on short term deposit in a past few days.

BoB recently hiked rates by 0.25 percentage points as its deposits worth less than Rs 1 crore with maturity period of 7-14 days will earn 5% interest as against 4.75% earlier. Interest rates on 15-45 days and 46-90 days fixed deposits have also been raised by 0.25 percentage points to 5%.

Bank of India increased fixed deposit rates of select maturities by up to 0.75 percentage points. RBI pumped Rs 48,000 crore in the economy by cutting CRR.

Central Bank of India, in its shortest time bucket of 7-14 days, hiked interest rates from 2.5% to 9%. ING Vysya Bank hiked its short-term deposit rates by 0.25 percentage points to 10%.