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Your deposits will fetch less returns as banks have started cutting interest rates. This comes in the wake of the Reserve Bank of India cutting the policy rate from 7.50 per cent to 7.25 per cent and easy liquidity in the banking system.
Punjab National Bank (PNB) and Axis Bank announced retail deposit rate cuts of up to 25 basis points on Wednesday. Usually, a deposit rate cut precedes lending rate cut.
Faced with tepid credit growth and ample liquidity, banks will seek to bring down their cost of deposits to protect their margins.
Delhi-headquartered PNB cut interest rates on domestic term deposits of less than ₹1 crore in three maturity buckets by 25 basis points. The highest interest rate that the state-owned bank is offering is 8.25 per cent (8.50 per cent earlier) on the one-tofive-year maturity bucket.
On domestic term deposits of more than ₹1 crore but less than ₹10 crore too, the bank has cut interest rates in four maturity buckets by 25 basis points. In this case, the highest interest rate that PNB is offering is on deposits in the one-to-two-year maturity bucket — 8.25 per cent (8.50 per cent).
Axis Bank, the country’s third-largest private sector lender, will reduce its retail deposit rates by 10-20 basis points (bps) across tenures, effective June 9.
The deposit rate cuts, which generally precede a lending rate cut, are on retail deposits under ₹5 crore, the bank’s spokesperson said.
On April 13 this year, two weeks after the RBI’s first bi-monthly policy, Axis Bank had revised its base rate or the minimum lending rate to 9.95 per cent from 10.15 per cent per annum and also cut its deposit rates by 0.25 per cent across multiple maturities.
Easy liquidity in the banking system is underscored by the fact that the weighted average money market rate softened to 7 per cent on Wednesday as against the previous average of 7.25 per cent.
Monetary policyPost the monetary policy, the country’s biggest lender State Bank of India cut its base rate to 9.7 per cent (from 9.85 per cent). Allahabad Bank and Dena Bank too cut their base rates to 9.95 per cent (10.25 per cent) and 10 per cent (10.25 per cent), respectively.
PNB and Axis Bank’s new deposit rates are effective from June 8 and June 9, respectively.
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