HDFC Bank, the countrys largest private-sector lender, has reduced interest rates on select fixed deposits (FDs) below Rs 3 crore, effective April 1, almost two months after the RBIs rate-setting panel slashed the repo rate by 25 basis points.
The lender has cut deposit rates by 35 basis points on fixed deposits with a tenure of 2 years and 11 months (35 months) and by 40 basis points on fixed deposits with a tenure of 4 years and 7 months (55 months).
Now, the bank is offering a 7 per cent interest rate on deposit of up to Rs 3 crore for 35 months tenure and 55 months tenure. Senior citizens will receive an additional 0.50 per cent on these deposits.
The bank, in July 2024, had launched special deposit schemes wherein it offered 7.35 per cent interest rates on 35 months deposits and 7.40 per cent interest rates on 55 months deposits.
The deposit rates offered on these buckets (35 months and 55 months) was the highest among its peers. The bank had launched the special edition fixed deposit scheme at a time when it was looking to garner deposits to fund its credit growth.
From April 1, the bank is offering the highest interest rate of 7.25 per cent for a tenure of up to 21 months. Beyond 21 months tenure, the bank is offering a deposit rate of 7 per cent.
Interestingly, the deposit rates on the special edition fixed deposit scheme have been trimmed almost two months after the RBI monetary policy committee reduced the policy rates by 25 bps, the first rate cut in almost five years.
However, banks have been reluctant to cut deposit rates, given the tightness in deposit mobilisation. As a result, the policy rate cut has not also been transmitted to lending rates, except for the external benchmark linked loans.
'Lending rates on fresh rupee loans have increased. We believe that the transmission of the Feb 2025-25 bps rate cut is yet to take place as year-end deposit cost pressures exist,' said Suresh Ganapathy of Macquarie Capital in a recent report.
Tight liquidity in the system for almost four months also weighed on the rate transmission.
However, banking system liquidity moved to surplus after a gap of four months due to the central bank infusing durable liquidity through frequent open market operations (OMOs) purchases, dollar-rupee buy-sell swaps, among others.
Since January, the RBI has injected over Rs 5 trillion of durable liquidity into the banking system through government securities purchases via OMO auctions and dollar-rupee buy-sell swaps. Another Rs 1.8 trillion was infused through repos maturing in early April.
The tightness in deposit mobilisation is also reflected in the record issuances of certificate of deposits (CDs) by banks in March to meet the year end funding needs of the economy.
In March, banks issued Rs 2.25 trillion of CDs, with Rs 1.17 trillion worth of CDs issued in the March 7-21 fortnight.
Banking credit in the economy grew by 11.1 per cent year-on-year (Y-o-Y) in the fortnight ended March 7, while deposits grew at 10.2 per cent during the same period.
Subrata Panda/Business Standard
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