Employee union urges Bank of Maharashtra to hike rates on term deposits

An employees union has urged state-owned Bank of Maharashtra to raise the interest offered on fixed deposits for senior citizens to 7.10 per cent for 1- to 3-year tenor and above 6.50 per cent for others.

“…the interest differential on the maximum rate offered by Bank of Maharashtra and the above said banks (Bank of Baroda & Canara Bank) now stands at 75 bps for both senior citizens and for the normal category. It is observed that some of our branches are already losing good balances in their savings deposits as well as fixed deposits, which are maturing, to the other banks,” said the union in a letter to the managing director and chief executive officer of Bank of Maharashtra.

As the Reserve Bank of India (RBI) is on a monetary tightening path, resulting in rates on assets and liabilities rising, any interest differential in excess of 50 bps on deposits among major public sector banks is likely to result in an exodus of deposits favouring banks, which offer high-interest rates, said the United Forum of MahaBank Unions.

The union argued that 7.10 per cent is the new benchmark for interest rates on fixed deposits across the banking industry. In order to retain existing depositors and bring in new customers, Bank of Maharashtra’s maximum rate should be above 7 per cent at least.

The Pune-headquartered bank offers the highest interest of 6.30 per cent on term deposits of up to Rs 2 crore for a 1-year tenor. Senior citizens are offered an additional 50 bps on all maturity slabs. Other public sector lenders, such as State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank and Bank of India, are offering peak interest rates of 6.75 per cent, 7.05 per cent, 7.25 per cent, 7 per cent, and 7.05 per cent, respectively.

In its Q3 update, Bank of Maharashtra has reported a 22 per cent year-on-year (YoY) growth in advances to Rs 1.57 trillion in Q3FY23 while deposits have grown by 12 per cent YoY to Rs 2.08 trillion. On a sequential basis, advances of the lender grew 6.02 per cent while deposits grew 6.42 per cent. The CASA ratio, however, has gone down to 52.50 per cent as of December 2022.