State Bank of India, IDBI Bank and Yes Bank on Monday slashed deposit rates by 25 to 75 basis points across various maturities -- a move that may set the stage for other banks to follow suit.
The largest lender in the country, SBI, has reduced deposit rates by 40 to 50 basis points across maturities. On deposits for a period of one year up to two years, the bank has reduced interest rates by 40 basis points to 8.10 per cent. And deposits for any length of time between two years and 1,000 days would now earn an interest of 8.5 per cent against 9 per cent earlier.
Similarly, the rate for deposits above 1,000 days and less than three years has been lowered by 50 basis points to 8.25 per cent. The new rates would be effective from March 9.
IDBI Bank has reduced interest rates on retail term deposits for one to three years, 1,100 days and more than three years up to 10 years by 25-50 basis points. The new rates would be effective from March 6.
"We have brought down deposit rates to reduce the cost of resources. Even after this revision, our rate structure would remain attractive compared to other banks," said C S Jain, head of retail at IDBI Bank.
Private sector lender Yes Bank has reduced deposit rates across maturities by 25-75 basis points. Interest rates on deposits with tenures of more than a year up to two years were lowered by 75 basis points to 9.25-9.50 per cent, depending on the amount deposited.
Similarly, all deposit rates beyond the tenure of two years have been reduced by 25 basis points. The new rates range between 8.75 per cent and 9.25 per cent, depending upon the deposit amount.
Even the lending rates have been cut. IDBI Bank has also reduced its floating home loan rates by 50-100 basis points. The revised floating interest rate would be 9.75 per cent for loans up to Rs 20 lakh (Rs 2 million) and 10.25 per cent for loans above Rs 20 lakh (Rs 2 million). The new rates would be effective from March 3.
For loans up to Rs 30 lakh (Rs 3 million), IDBI Bank has reduced the margin money from 20 to 15 per cent. Also, for loans above Rs 30 lakh (Rs 3 million), the margin money requirement has been brought down to 20 per cent from 25 per cent.
Reserve Bank of India Governor Duvvuri Subbarao had met bank chiefs on Friday to discuss the interest rate scenario. The central bank was particularly keen that private sector lenders make loans cheaper as they have so far pared interest rates by only 50 basis points. On the other hand, public sector banks have slashed rates by up to 200 basis points.
Following the meeting, some banks such as Punjab National Bank and Union Bank of India had reduced home and auto loan rates on Saturday.
While PNB reduced car loan rates by 50 basis points, Union Bank cut rates on home loans by 25-100 basis points and car loans by 125-150 basis points. "Our deposit rates are the lowest in the market at around 8 per cent, so there is little scope for further reduction," said a Union Bank executive.
SBI has frozen home and auto loan rates at 8 per cent and 10 per cent respectively for a year.
"We have cut deposit rates to reduce the cost of resources. Even after this revision, our rate structure would remain attractive compared to others," said C S Jain, head of retail, IDBI Bank.