New Delhi, Nov 17 (IANS) With major infusion of fresh liquidity arising from the demonetisation measure, private lenders ICICI Bank and HDFC Bank on Thursday slashed fixed deposit (FD) rates by up to 0.25 per cent.
The ICICI Bank has posted on its website that for FDs between 390 days to two years, the interest rate stands lowered by 0.15 per cent effective Wednesday. Now it will pay 7.10 per cent as against 7.25 per cent earlier.
Effective Thursday, the HDFC Bank has reduced interest rates by 0.25 per cent across all tenures on bulk deposits ranging Rs 1-5 crore.
HDFC's one-year FDs will fetch interest at the rate of 6.75 per cent as against the 7 per cent earlier.
For FDs with 3 years 1 day-to-5 years tenure, the rate has been lowered to 6.5 per cent from 6.75 per cent.
According to estimates, banks have collected cash deposits of over Rs 4 lakh-crore following Prime Minister Narendra Modi's November 8 announcement, demonetising Rs 1,000 and Rs 500 notes to eliminate black money, counterfeit notes and terror financing.
On Wednesday, private sector Axis Bank announced a cut in its marginal cost of fund-based lending rate (MCLR) by 0.15-0.20 per cent, effective from Friday.
For loans of overnight tenure, the new MCLR will be 8.65 per cent. One-month tenure will attract an interest rate of 8.70 per cent, while those for three and six months will be 8.90 and 9 per cent, respectively.
For one year, the new MCLR will be 9.05 per cent. The bank will levy interest rate of 9.10 per cent and 9.15 per cent for two years and three years, respectively.
Following the Reserve Bank of India (RBI) cutting its repo rate by 25 bps last month, public sector lenders -- the United Bank of India, Canara Bank, Indian Bank, Indian Overseas Bank, Bank of India and the Syndicate Bank -- as well as the private sector ICICI and Kotak Mahindra banks have cut lending rates.
To nudge banks to transfer the benefit of RBI rate cuts, previous Governor Raghuram Rajan had announced a shift to the MCLR regime.
Under the MCLR, banks need to consider their marginal cost of funds, or the cost incurred on incremental deposits across different maturities, to decide on interest rates.
However, though Rajan -- during his tenure -- had cut rates by 150 bps since January 2015, banks had hardly moved at the same pace to cut their lending rates.
From the state-run banks' point of view, their accumulation of massive non-performing assets (NPAs), or bad loans, that is impacting profitability, is keeping them from cutting rates.
--IANS
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