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Following the lead of State Bank of India, private sector lender ICICI Bank and public sector lender IDBI Bank have cut deposit rates across various maturities by 25-50 basis points and 50-100 basis points, respectively.
For ICICI Bank, the revised deposit rates will take effect from May 11.
The lender’s 7 to 14 days deposit will now earn interest at the rate of .25 per cent whereas the 270 days to one year scheme will carry an interest of 6.75 per cent. The 990 days to 3 years deposit will earn an interest of 8.0 per cent.
ICICI Bank had last cut its deposit as well as lending rates by 25-50 bps on April 21 just hours after the Reserve Bank of India (RBI) announced a 25 bps cut in the policy rates. The bank has been trying to reduce its dependence on costly wholesale deposits and rely more on cheaper retail deposits. In 2008-09, the share of current accounts and savings accounts (CASA) increased to 28.7 per cent from 26.1 per cent at the end of the previous financial year. Its average cost of funds reduced from 7.5 per cent to 7 per cent at the end of March, 2009.
SBI has cut deposit rates thrice since the beginning of the current financial year and has hinted at further room for reduction in deposit rates.
For Mumbai-based IDBI Bank the revision in rates is steep (100 bps) at the short end (up to six month maturity) while it is 50 bps for long term deposits. The new rates will be effective from May 21, 2009.
“There is more than adequate liquidity in the system while the credit off-take is not much.” Banks are seating on pile of resources and we are using this opportunity to reduce cost of funds through deposit rate reduction, a senior IDBI Bank official said.
This is the second revision in interest rate by Mumbai-based public sector bank in this financial year. It had reduced term deposit rates by 25-50 basis points from May 04.