Mid-size public sector banks would wait till the mid-term policy review by the Reserve Bank of India before taking a call on reducing interest rates on fixed deposits, top officials said today.
“We will take a call on cut in the deposit rates after the mid-term policy,” Executive Director of Vijaya Bank Ms Subhalakshmi Panse told PTI today.
She said the entire cost structure and overall deposit growth would be taken into account before reducing rates on fixed deposits.
Interestingly, deposit growth registered by Indian banking system fell short of the RBI’s target last financial year amid liquidity crunch faced by the lenders.
Last fiscal, banks’ deposits grew 13.4 per cent to Rs 60.72 trillion in the year to March 23, below the RBI’s projection of 17 per cent.
State Bank of India, recently reduced fixed deposit rates by 0.25 per cent in tenors up to 240 days.
Bankers said that mid-term policy review on June 18 will bring clarity on the cost structure of the banks and help them take a decision on FD rates.
“Basically, it depends on the fund management position of different banks,” Dena Bank General Manager (Financial Management, IRC, Treasury & ID), Mr Sudhir Kumar Jain said.
He added that banks would factor in the availability of funds before deciding on reducing deposit rates.
Central Bank of India’s Chairman and Managing Director Mr M V Tanksale and Corporation Bank’s CMD Mr Ajai Kumar have also opined that they will wait for the RBI move on June 18 to take a final call on their deposit rates.
An analyst with Angel Broking said banks are unlikely to take a call on fixed deposit rates till there is an improvement in the liquidity situation.
“As most of the fixed deposit rates are of one year or more than one year tenor, the reduction by SBI is not indicative of a trend. I expect that banks will not reduce fixed deposit rates until liquidity situation improves in the system,” Angel Broking Vice President, Research, Mr Vaibhav Agrawal, said.