Indian Banks Starting To Cut Deposit Rates
Two State owned banks on Tuesday said they were reducing their deposit rates in what could largely be viewed as a precursor to cuts in lending rates. Indian Bank and Uco Bank both cut their deposit rates within 24 hours of public sector banks announcing the home loan package.
The Chennai based Indian Bank reduced interest rates on domestic term deposits of between Rs 1-5 crore (US$ 200,000 to 1 million) by 25-150 basis points across various maturities. “With inflation coming down, the cost of funds should also come down. Our focus remains on the core deposits (and) not bulk deposits. Hence, we have decided to cut interest rates for bulk deposits,” Indian Bank Chairman and Managing Director M S Sundara Rajan said. The reduction in deposit rates is effective December 15.
Kolkata based, Uco Bank said it would lower interest rate on lending and deposits by January 2009. “It is time to reduce interest rate on deposits now as the rate of inflation is coming down. We will also take a call on reducing the lending rates by 100 basis points in January. The final decision regarding this would be taken in the asset-liability committee (Alco) meeting on December 26,” the bank’s Chairman and Managing Director S K Goel said.
State owned banks as well as private lenders such as HDFC Bank and HSBC have lowered their deposit rates by at least 50 basis points since the start of December.
While the country’s largest lender, State Bank of India, has yet to commit, saying that it may lower deposit and lending rates soon, whilst the largest private sector player, ICICI Bank, also indicated over the weekend that rates may come down over the next two-three weeks.
The RBI, India’s central bank has eased official interest rates by 250 basis points since October, and banks have yet to pass on the majority of that cut to borrowers citing high funding costs as they have been competing for deposits for much of the last year by offering high interest rates. Before lending rates can be reduced significantly, Indian banks must first reduce their deposit rates, and the move by Indian Bank and Uco Bank is the beginning of this easing most certainly a sign of things to come.
Compare India’s Best Credit Card Deals
Comments
Leave a Reply