Business

Friday December 5, 2008

Lower deposit rates, 10 banks submit revision and more to follow suit

By DALJIT DHESI


PETALING JAYA: Ten banks have reduced their fixed deposit (FD) rates following the recent 25 basis point cut in the key interest rate by Bank Negara, and more are expected to follow suit.

At the same time, some banks have yet to lower their base lending rate (BLR) in accordance with the cut.

A check at the The Association of Banks in Malaysia (ABM) toll-free service ABMConnect showed that the 10 banks that have submitted their revised FD rates are Affin Bank, AmBank, Alliance Bank, Bank of China, Bank of Tokyo, EON Bank, Hong Leong Bank, HSBC Bank, Public Bank and Royal Bank of Scotland.

“We expect more banks to submit their revised FD rates in the coming week,” an official from ABMConnect told StarBiz.

According to the official, many of the revised rates were in accordance with the Bank Negara set rate known as the floor or minimum rate.

Effective Nov 25, the minimum rate set by the central bank for 12-month FD is 3.5% per annum. The minimum rate set for one-month FD remains at 3% per annum.

The official also said a handful of ABM’s member banks had yet to notify the association of the cut in their BLR but she expected them to do so within a week. It was the practice of banks to notify the association of any reduction in the BLR on a periodic basis, she said.

A lower BLR means cheaper cost of borrowings and as such, the interest rates for all consumer loans that are pegged against the BLR would be reduced accordingly.

Bank Negara had on Nov 24 slashed the overnight policy rate (OPR) by 25 basis points to 3.25% in an effort to stimulate economic growth. It also lowered the statutory reserve requirement to 3.5% from 4% to inject more liquidity into the banking system.

Hong Leong Bank Bhd (HLB) group managing director Yvonne Chia said the bank had revised its BLR and FD rates since the OPR cut.

The BLR was reduced to 6.5% per annum while the 12-month FD rate was now lower at 3.5% per annum from 3.7% earlier, she said.

An official from another bank said he expected banks to embark on promotion campaigns to attract depositors.

The Alliance Financial Banking group has also reduced its BLR to 6.5% per annum from 6.75% previously.

Citibank Bhd head of wealth management products Aisyah Lam said the bank would maintain its board rates, taking into account the changes in market conditions and its strategic objectives.

Board rates refer to FD rates on deposit tenures of between one and 12 months. Lam said, however, the bank had revised its BLR downwards to 6.55%.

“As such, interest rates for all consumer loans that are pegged against the BLR have accordingly been reduced by the same quantum and we have also automatically revised the instalment amounts downwards for these loans,’’ she noted.


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