Copious fund inflows due to demonetisation of the high
denomination ₹500 and ₹1,000 bank notes is nudging term deposit rates
south, with a clutch of banks such as State Bank of India, Canara Bank,
ICICI Bank, HDFC Bank, United Bank of India announcing rate cuts.
The
deposit rate cuts range from five to 100 basis points. One basis point
is equal to one-hundredth of a per cent or 0.01 per cent.
State Bank of India has cut retail deposits rates (of less than ₹1 crore) in three maturity buckets by 15 bps.
The
new rates, which are effective from November 17, on the three slabs
are: 6.90 per cent (7.05 per cent earlier) on deposits in the one year
to 455 days slab; 6.95 per cent (7.10 per cent) for 456 days to less
than two years; and 6.85 per cent (7 per cent) for two years to less
than three years.
Now, the highest interest rate that
India’s largest bank is offering is 7 per cent on deposits of tenor 211
days to less than one year.
The easy liquidity due
to heavy deposit inflows may prompt SBI to lower its marginal cost of
funds-based lending rate (MCLR) when it comes up for review at the end
of this month. Currently, SBI’s one-year MCLR stands at 8.90 per cent
(9.05 per cent before November 1, 2016).
ICICI Bank had cut interest rate on the most popular maturity slab (390 days to two years) from 7.25 per cent to 7.10 per cent
Canara Bank has cut both retail and bulk deposit rates in different
maturities by five to 25 bps effective November 21. HDFC Bank has pared
bulk deposit (between ₹1 crore and ₹5 crore) rates by 25 bps across all
tenors
United Bank of India has reduced retail term deposit rates by 25-100
bps. With this cut, which is effective from November 18, a one-year
deposit placed with the bank will earn 6.75 per cent (7 per cent
earlier). The steepest cut of 100 bps has been in two maturity slabs –
46-60 days (to 4 per cent) and 91-180 days (to 5 per cent)
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