Bajaj Finance Cuts High-End Deposit Rates by 0.2%

8 Jul 2024 , 11:14 AM

In defiance of industry trends, top NBFC Bajaj Finance has chosen to cut deposit rates by 20 basis points on its highest rate slab, while several banks are having severe difficulties attracting public deposits.

According to news reports, the financial company will give 8.40% annually starting on July 16 as opposed to 8.60% currently for a 42-month term. Seniors will receive 8.65% instead of the current 8.85%. The remaining maturity slabs won’t alter.

The rate-cutting move was made in response to the company’s 26% annual growth in deposits, which stood at ₹62,750 Crore at June’s end as opposed to ₹49,944 Crore the previous year.

There has been fierce competition for deposits as mainstream lenders have increased deposit amounts to entice clients, while the capital markets have taken large amounts of money from savers. In an effort to attract consumers, State Bank of India increased deposit rates by 25–75 basis points in May.

Indeed, compared to their banking counterparts, non-banking finance providers offer greater rates.

For both regular and senior customers, Bajaj Finance’s 42-month deposit rate would remain the top offer, even after the rate cut.

Nonetheless, it stated that its liquidity situation remained robust with a net surplus of over ₹16,200 Crore at the conclusion of the first quarter of the fiscal year in a regulatory report sent to stock exchanges last week.

The decline in net interest margin (NIM) could have been the catalyst for this decision. The company said at the end of March that the progressive change in assets under management’s composition toward secured assets and the rising cost of funding had caused its net interest margin to moderate throughout FY24.

The company projected that its cost of funds would peak in July and August, and that its net interest margin would drop by 30–40 basis points between the June and September quarters, down from the 10% in the March quarter.

Because repricing deposits at higher rates is a continuous process, industry captains anticipate that pressure on net interest margin (NIM) for financial sector companies will persist for the next few quarters.

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