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ICICI Bank, HDFC Bank cut retail term-deposit rates

India’s top two private sectors banks – ICICI Bank and HDFC Bank – have reduced interest rate on retail term deposits.

The move comes at a time when the industry has been demanding banks to pare their lending rates to push economic activities and investments. Bankers have so far maintained that deposit rates need to fall before they can cut lending rates.

ICICI Bank has reduced interest rate on retail term deposits with maturity of 390 days to up to two years by 25 basis points to 8.75%.

The rate cut is effective from November 28, 2014. Following this revision the bank now offers a maximum of 8.75% interest on term deposits of less than Rs 1 crore instead of 9% earlier.

“ICICI Bank has reduced rates in select tenures of retail deposits given the improving liquidity environment and systemic trends,” a spokesperson of the bank said in an e-mailed response to Business Standard’s query on its deposit rate cut decision.

HDFC Bank has also cut retail term deposit rates, by 25-50 basis points. The rate cut is effective from December 1, 2014 and is applicable on retail term deposits with maturity of 46 days to less than one year.

On Tuesday, the Reserve Bank of India (RBI) Governor Raghuram Rajan kept the policy repo rate unchanged but held out hope for the industry by saying the central bank could ease monetary policy early next year if downward momentum in inflation continued and fiscal developments were encouraging.

Most lenders have ruled out the possibility of an immediate lending rate cut because of high deposit rates. “Regarding lending rate cuts, I think it will happen sometime towards the end of the first quarter…A few of the bigger banks are now beginning to cut their deposit rates. As and when that get entrenched and deposit rates start trending downwards, we can see some kind of reduction in base rates (the minimum lending rate for banks),” Arundhati Bhattacharya, chairperson of State Bank of India (SBI), said after the fifth bi-monthly review of central bank’s monetary policy yesterday.

SBI, the largest lender in the country, is one of the few banks that have recently reduced retail term deposit rates.

The bank cut interest rate on retail term deposits with maturity of seven days to 45 days by 100 basis points to 5% with effect from November 1, 2014. The lender had also reduced interest rates on retail term deposits with maturity of one year to less than three years by 25 basis points in September, 2014.

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