Two of the biggest private sector lenders ICICI Bank and HDFC Bank have effected a cut of up to 0.50 percent in term deposit rates following tepid credit growth and ease in money market rates.
The moves come amid rising expectations of a lower rate regime. Reserve Bank Governor Raghuram Rajan had also expressed disappointment at banks for not cutting lending rates despite a steep fall in money market rates for many months.
ICICI Bank, the largest private sector lender, cut its deposit rate offering in the 390-days to two-year buckets by 0.25 percent to 8.75, according to its website.
"ICICI Bank has reduced rates in select tenures of retail deposits given the improving liquidity environment and systemic trends," the bank spokesperson said.
HDFC Bank too cut its retail deposit rates by 0.25-0.50 percent in the 46-days to under-one year bucket.
The reduction has been due to deposit growth outpacing credit growth, a drop in the money market rates and aligning with the competition which has already cut the rates, a bank's treasury head Ashish Parthasarthy said.
ICICI Bank revised its rates on November 28, while HDFC Bank did it on December 1.
Both the banks put up the revised rates on their websites. Smaller lender Yes Bank may also join the fray, its chief financial officer Rajat Monga said.
Deposit rate cuts are generally seen as a precursor to a cut in the lending rate as the base rate or minimum rate of lending formulas are based on the cost of deposits.
Axis Bank, third largest private sector, is the only one to have revised downwards its base rate by 0.10 percent.
At the post-policy press conference, Rajan had expressed concern that the RBI measures are not getting transmitted into rate corrections at banks but said that he is not asking the banks to do the review.
Deposit repricing was kicked off by the market leader SBI last month when it had announced a steep 1 per cent cut for short-term deposits up to Rs 1 crore maturing in seven to 45 days to 5 percent. In the September quarter, SBI reduced rates thrice, twice in September alone, on retail deposits.
Recently, some state-owned banks had reduced rates on fixed deposits on account of easy liquidity and slow credit offtake. In October, the Delhi-based Oriental Bank of Commerce had reduced interest rates on retail deposits by 25-50 bps.
Similarly, PNB too had in October reduced rates by 25 bps on deposits worth over Rs 1 crore with maturity of 271 days to less than a year to 8.75 percent.
For the fortnight ending November 15, credit continued to grow lower than deposits at 11 percent to Rs 62,52,937 crore, while deposits grew 12.16 percent to Rs 82,53,630 crore, according to the Reserve Bank data.
Updated Date: Dec 04, 2014 17:33:13 IST