Bank has already brought-down share of high cost funds in total deposits though FY13
“The bank has already brought-down the share of high cost funds in total deposits though FY13. The interest rates for bulk money, including certificate of deposits (CDs) have declined in the last few weeks. This should help to reduce the cost of funds,” Chairman and Managing Director M V Tanksale said.
The interest rates on short-term money have eased since the beginning of the new financial year.
They were ruling in the band of 8.8-10.1 per cent in March and are in the 7.7-8.1 per cent band now (middle of May).
The share of high cost deposits was about 31.8 per cent (Rs 62,447 crore) at the end of March 2012.
It came down to Rs 24.37 per cent (Rs 55,085 crore) in March 2013. Tanksale said the bank was working to keep high cost deposits below Rs 55,000 crore.
The finance ministry has directed public sector banks to sharply cut the share of high cost bulk deposits to 15 per cent of total deposits.
While contracting bulk deposits at lower rates would reduce the cost of funds, its benefits will accrue only over quarters. The cost of funds was 7.52 per cent at the end of Q3 (December 2012) and declined to 7.50 per cent by March. The overall cost of funds for FY13 actually rose to 7.53 per cent from 7.28 per cent for 2011-12.
Meanwhile, rating agency Icra has assigned a CGR3+ rating to the bank’s corporate governance practices.
The rating implies the bank’s practices, conventions and codes provide an adequate level of assurance on the quality of corporate governance. This rating is on a scale of CGR1 to CGR6, where CGR1 denotes the highest.
Icra said the bank has improved on its public disclosures, especially on segmental asset quality indicators, as compared with peer banks in the recent past.
While the bank has set up a separate board level committee for monitoring recovery, the weak asset quality indicators and relatively lower capitalisation levels weigh down the bank’s financials, the rating agency added.