Bank fixed deposit rates have started falling further on the back of a sharp drop in lending rates in recent weeks, after the Reserve Bank of India went in for another round of rate cut last month. Expectations of a fresh rate cut by the central bank amid a plunging rate of inflation has also prompted banks to go for a downward revision of their term deposit rates.
Public sector Punjab National Bank has announced that it will cut interest rates by 50-100 basis points on fixed deposits of less than three years, effective from today. "Punjab National Bank has informed BSE that the Bank has decided to realign the interest rates on retail term deposits by reducing interest rates by 50 bps to 100 bps in the time slabs from '91 to 179 days' to '2 years to less than 3 years," the bank said in a statement in New Delhi on Tuesday.
For term deposits of 91 to 179 days, the rate of interest has fallen from 5.50 per cent to five per cent, while it has been cut to six per cent from seven per cent for terms of 180 days to one year. Deposits of between one to two years will now yield interest at seven per cent, against the earlier eight per cent. There is no change in interest rates on other time slabs.
Last week, the country's largest lender State Bank of India (SBI) had also hinted at a deposit rate cut. ''There is a possibility of a downward revision in lending as well as deposit rates,'' SBI chairman OP Bhatt had said.
On Sunday, Oriental Bank of Commerce also announced plans to cut term deposit rates up to one year by 50 bps. Meanwhile, Canara Bank and Vijaya Bank have reduced their benchmark prime lending rates (BPLR) by 50 bps.
The reduced rate of interest is intended to meet the credit demands of the needy segments and it is expected to contribute to credit growth in tune with the present demand of the economy, the bank said in a statement. The bank said interest rates on personal loans, as well as existing home loans linked to BPLR, were also reduced by 50 bps, it said.
Private sector lender Citibank has also decided to cut its mortgage prime lending rate by 50 basis points to 13.75 per cent. The move comes at a time when the government complained of inadequate response from these lenders to ease monetary policy by RBI.
In all, eight banks - Canara Bank, Central Bank, Vijaya Bank, OBC, Union Bank, Bank of Baroda, UCO Bank and Punjab & Sind Bank - have decided to reduce prime lending rate by 50 basis points; while another four - Allahabad Bank, United Bank, Dena Bank and Andhra Bank - will lower prime lending rates by 25 basis points.
All advances linked to PLR like auto loans, home loans, SME loans and other credit would now draw lower interest rates. However, even after cuts, PLR would remain above the double-digit mark, whereas the industry demanded single digit lending rates at a meeting with Prime Minister Manmohan Singh last week.