In a move that may dishearten people, ICICI Bank Ltd has slashed interest rates on bulk deposits by 15-25 basis points (bps) across maturities, effecting from Tuesday. The information was posted on the bank’s website.
The rate reductions are applicable on deposits worth Rs 1 crore and above. The bank had reduced the interest rate on bulk deposits by up to 55 bps on 31 March.
According to reports, interest rates on deposits with maturities between 91 and 184 days have been brought down by 25 bps to 6.75%, from 7% earlier. Similarly, the interest rate on deposits with maturities in the range of 271-330 days have been reduced by 15 bps to 7.25%, from the earlier rate of 7.4%. Notably, a bps is one-hundredth of a percentage point, or 0.1%.
Bank’s move is aimed at improving liquidity conditions. In April, the Reserve Bank of India (RBI) said that it would move the system towards neutral liquidity compared to its earlier stance of maintaining a liquidity deficit in the system. The central bank is doing this through a mix of foreign exchange market interventions and bond purchases. As liquidity conditions ease, banks will be more comfortable in dropping deposit rates which in turn allows banks to reduce lending rates.
On Monday, country’s largest lender State Bank of India (SBI) announced that it has reduced its marginal cost of funding-based lending rate (MCLR) by 5 bps, to 9.15%, leading to a commensurate drop in home and auto loan rates.