Banks seen boosting deposit camps at higher rates ahead of possible ceiling

• CB has given an ultimatum that it would not hesitate to impose deposit and lending caps if markets failed to adjust rates downward
• CB is of the opinion that along with inflation, interest rates have also peaked and hence should start to gradually come down

Banks are seen stepping up their campaigns to raise more deposits offering even higher rates than what prevailed until recently to build up their deposit bases and thereby their liquidity levels ahead of possible regulatory action to rein in the recent rise in deposit rates.
They were seen coming up with some odd maturities such as 100 days, 200 days, 300 days and 13 months with sizeable premiums compared to what they offer for their standard 90 days, 180 days and 12 months maturities.
Some banks were seen increasing their standard deposit rates too under special promotions which may run for a limited period to rake in large amount of deposits. 

The most recent step-up in deposit mobilisation efforts at somewhat higher rates came amid widespread expectations for the rates to ease in the near term from their hitherto remained elevated levels. 
While there were promotions under special schemes of deposit tenors at slightly attractive rates, they were seen becoming more pronounced specially since mid-November when the Central Bank clearly indicated that they want to see an easing path for rates. 
For instance, while banks are offering mostly around 17 percent for their standard 12-month term deposit, a comparable 13-month term deposit is offering between 24 percent to 26 percent, with 7 to 9 percent premium—a comparison between a few licensed commercial banks showed. 

The fact that the average weighted new fixed deposit rate in the licensed commercial banking sector during October been at 23.61 percent proved clearly how higher rates were offered by banks despite their standard rates. 
A year ago, the comparable rate in the sector was about a third at 6.19 percent, reflecting the wild ride the economy and the financial market went through in an extremely shorter span. 
On November 15, Central Bank Governor Dr.Nandalal Weerasinghe told a forum consisting of banking sector chieftains that he believed the rates had peaked after inflation had peaked and thus the rates would follow the path of inflation, which now appears to be trending down. 

Consumer prices decelerated for two consecutive months after peaking near 70 percent levels in September.
A week later, the Monetary Board made clear that they were not satisfied with where the current deposit rates and the short term lending rates stands and issued an ultimatum that they would not hesitate to impose deposit and lending caps if the markets failed to adjust the rates themselves downward.
Central Bank cited the recent improvements in interbank liquidity conditions on top of the current disinflation path for why the rates need to ease from where they are and expressed their willingness to intervene to ease the liquidity shortages in banks. 

However, banks which appeared to have become spooked by the recent comments by the Central Bank on the prospects of caps on deposits are seen stepping up their efforts to raise as much as possible from deposits so that they lock them in at different maturities before the regulator strikes. 
They may also be looking to avoid intense competition in the sector for deposits under a scenario of deposit caps where they will be unable to outprice beyond a certain level.