Private sector lender ICICI Bank has slashed the fixed deposit (FD) rates by up to 50 basis points effective May 11. The customers will now get 5.25 per cent interest on deposits up to one year, while those above one year will earn 5.7 per cent to 5.75 per cent, ICICI Bank said on its website. It comes as the banks are flush with liquidity on account of low credit growth. The lenders are instead parking their funds with the Reserve Bank of India (RBI) at a rate of interest as low as 3.75 per cent. The average amount deposited between May 4 and May 6 stood at over Rs 8 lakh crore, which is considered on the higher side.
The banks were also not comfortable to lend to weak companies in an economy slowing due to coronavirus, the experts said. "Since banks are flooded with liquidity, the FD deposit rate cut may be to deter the depositors from parking more cash in the banks," said SEBI-registered investment adviser Basavaraj Tonagatti. The rates are getting lowered by the banks since inflation is also easing according to the RBI data, Tonagatti also said.
In March, the country's largest bank State Bank of India (SBI) had sharply reduced the fixed deposit (FD) rates after the RBI, in its 7th bi-monthly monetary policy statement, announced a 75 basis points (bps) cut in repo rate along with 90 bps reduction in reverse repo rate to offset the impact of coronavirus pandemic on the economy.
SBI had earlier announced an interest rate cut on FDs on March 10. The bank had reduced domestic retail term deposit (TD) interest rates by 20 bps to 50 bps across tenors and bulk TD interest rates reduced by 50 bps to 100 bps across tenors.