Uco Bank plans to brings down its cost of deposits to 8.3 per cent during the current year. According to information from the bank, the average cost of deposits reached 8.76 per cent at the end of March 31, 1997. The cost of deposits in the previous year was 7.87 per cent. The industry average of the cost of deposits for last year was 6.73 per cent. According to the strategic revival plan - formulated recently and approved by the finance ministry - the cost of deposits would be brought down to 8.15 per cent in 1998-99 and then to 8 per cent in the year after.

As a conscious measure to mobilise low cost deposits the bank has decided to increase the percentage of savings deposits and current account deposits in its portfolio by 1 per cent and 0.5 per cent respectively. Certificates of deposits being high cost funds the bank has decided "these should not be encouraged except on positive signal from the corporate office"(of the bank).

The bank has observed that "the branches are too negligent in providing for the cost of deposits. There are instances where branches booked 6 to 7 per cent on savings banks accounts. The casual approach to calculation of interest cost and passing entries in `interest paid account' and `interest accruable and payable account' has landed us in excess provisioning at many branches". Such branches have been told to retrieve the excess provisioning.

Branch manager have been exhorted to ensure that the cost of savings bank deposits remain within 3.75 per cent per annum, while the cost on term deposits does not exceed 12.5 to 13.5 per cent on an average "in line with the industry average". The percentage of staff cost to the total expenditure in the bank at 29 per cent as on March 31, 1997 is the highest in the industry. At the end of 1995-96 this ratio stood at 32.41 per cent. This abnormal ratio is being sought to be reduced by reduction in various allowances to the employees.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.