MUMBAI: Private sector lenders such as ICICI BankBSE 4.79 % and HDFC BankBSE 1.07 % on Wednesday reduced interest rates on fixed deposits
by at least half-a-percentage point, following the leader State Bank of
India. The reduction in deposit rates comes when the economy is slowing
down and credit pickup is slack. But the reduction by private lenders
is half of SBI's, which brought down the rates by as much as 100 basis
points across many maturities to maintain profitability after lowering
lending rates.
ICICI Bank cut rates across maturities ranging from 91 days to less than five years. It now offers a maximum 8.75% on retail term deposits as against 9.25% earlier. But it is still 25 basis points higher than SBI's. In the shorter tenures of seven days to 45 days, however, the bank has increased rate by 50-75 bps.
A reduction in statutory reserve ratio - the amount of funds to be held in government bonds - by a percentage point is also helping the banks lend 15,000 crore more to corporate or retail customers. Deposits grew 14.1% year on year against RBI's projection of 16%.
"We could now see private players reduce lending rates to get competitive as many public sector banks like State Bank of IndiaBSE 4.20 % and Andhra BankBSE 3.54 % have cut rates on select retail products," said a banking analyst with a domestic brokerage. "ICICI Bank is also doing this to maintain a healthy margin of over 3%," he said.
ICICI Bank cut rates across maturities ranging from 91 days to less than five years. It now offers a maximum 8.75% on retail term deposits as against 9.25% earlier. But it is still 25 basis points higher than SBI's. In the shorter tenures of seven days to 45 days, however, the bank has increased rate by 50-75 bps.
A reduction in statutory reserve ratio - the amount of funds to be held in government bonds - by a percentage point is also helping the banks lend 15,000 crore more to corporate or retail customers. Deposits grew 14.1% year on year against RBI's projection of 16%.
"We could now see private players reduce lending rates to get competitive as many public sector banks like State Bank of IndiaBSE 4.20 % and Andhra BankBSE 3.54 % have cut rates on select retail products," said a banking analyst with a domestic brokerage. "ICICI Bank is also doing this to maintain a healthy margin of over 3%," he said.
Source : http://economictimes.indiatimes.com
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