OBC, IOB, YES Bank to be most affected by new base rate methodology
The new proposed regime for calculating base rate, the benchmark rate for pricing loans, is going to affect the lenders with greater proportion of term deposits in their funding base the most, says a Moody's report.
As per the report, Oriental Bank of Commerce (OBC), Indian Overseas Bank (IOB), YES Bank, Canara Bank and Union Bank are amongst the ones that will be most affected. While OBC has 76 per cent customer term deposit to total deposit, IOB is at 75 per cent whereas YES Bank is at 71 per cent at the end of FY15.
"Because the latest interest rates on various deposits will be used to calculate the marginal cost of funds, banks with a greater proportion of term deposits in their funding base would likely be most affected. Because longer tenor deposits are less sensitive to decreases in policy rates, they tend to increase the cost of funds derived using current calculation methods," said the report.
In the last financial year, several public sector banks such as Bank of India, IDBI, State Bank of India, Syndicate Bank, Bank of Baroda have more than 55 per cent of customer term deposit to total despoits