ICICI Bank has joined the growing list of financial institutions cutting deposit interest rates, a trend that has already been seen with other major banks like State Bank of India (SBI) and HDFC Bank. The revised interest rates, effective from April 17, 2025, reflect a larger shift towards lower returns for depositors in response to the Reserve Bank of India's (RBI) evolving monetary policy. This adjustment has led to widespread discussions among depositors and experts alike, as the new rates could potentially impact their savings plans.
Savings Account Interest Rates
For ICICI Bank customers holding savings accounts, the changes in interest rates are significant. Balances below Rs 50 lakh will now earn a reduced interest rate of 2.75% per annum, down from the previous rate of 3%. Meanwhile, for high-balance account holders with Rs 50 lakh or more, the interest rate has been cut to 3.25%, from 3.5%. This reduction reflects the broader trend in the banking sector, where interest rates on savings accounts have been declining across the board due to various factors, including the RBI’s monetary policy adjustments.
The reduced rates are likely to have a significant impact on account holders who rely on their savings accounts for interest income. With inflation and other economic pressures continuing to rise, depositors may find it more challenging to achieve substantial returns on their savings.
Fixed Deposit Interest Rates
The reduction in ICICI Bank’s FD interest rates also reflects a shift towards more conservative returns. For fixed deposits with shorter tenures, the rate has been lowered by up to 25 basis points. General customers will now receive interest rates ranging from 3% to 7.05% on FDs, while senior citizens will receive slightly higher rates, ranging from 3.5% to 7.55%. This move follows a broader industry trend, as many other banks have also revised their FD interest rates downward.
For example, FDs with tenures between 30 and 45 days will now offer an interest rate of just 3%, down from 3.5%. Similarly, the interest rate for FDs with tenures ranging between 61 and 90 days has been reduced from 4.5% to 4.25%. For deposits with tenures between 15 and 18 months, the rate has been reduced from 7.25% to 6.8%. FDs with tenures between 18 months and 2 years will now offer a rate of 7.05%, down from the previous 7.25%.
Despite these reductions, senior citizens continue to receive slightly higher rates across most tenures. For instance, they will earn 3.5% for FDs with tenures between 7 and 29 days. For FDs with tenures ranging from 46 to 60 days, 61 to 90 days, and 91 to 184 days, senior citizens will earn 4.75%, 5.25%, and 6.25%, respectively. For FDs with tenures ranging between 185 to 270 days, the rate will be 6.75%, while for long-term deposits, senior citizens will continue to receive a premium on their returns.
One interesting aspect of ICICI Bank’s FD revisions is that while the rates have been cut for most durations, there has been a slight increase in rates for FDs with tenures between 2 years and 5 years. For these deposits, general customers will earn 6.9% while senior citizens will earn 7.4%. This shift is an attempt by ICICI Bank to continue attracting long-term depositors even in a climate of declining interest rates.
However, for long-term FDs with tenures between 5 years and 10 years, the rates have dropped to 6.8% for general citizens and 7.3% for senior citizens. Additionally, the 5-year tax-saving FD, a popular option among tax-conscious investors, now offers 6.9% for general citizens and 7.4% for senior citizens.
Impact of RBI’s Policy Changes
The latest interest rate revisions by ICICI Bank and other leading banks highlight a broader trend in the Indian banking sector, influenced largely by the Reserve Bank of India’s (RBI) changing monetary policy stance. Over the past few years, the RBI has made several adjustments to key interest rates in response to the changing economic landscape, including inflationary pressures and global economic uncertainties.
As the RBI lowers its benchmark interest rates to boost economic growth, banks are responding by reducing their deposit interest rates. This is a strategy to maintain profitability while also managing the cost of funds. For depositors, however, this could mean lower returns on their savings and fixed deposits, which could affect their financial planning.
In light of this trend, many customers are seeking alternatives to traditional savings and FD accounts, such as mutual funds, stocks, and other investment options that might offer higher returns. However, these alternatives also come with higher risk, which may not be suitable for all investors, particularly risk-averse individuals such as retirees and conservative savers.
A Broader Shift in Bank Strategies
ICICI Bank's decision to lower deposit rates aligns with a larger strategic shift among banks, particularly in light of the ongoing economic conditions and the RBI’s current monetary policy. Many experts believe that these rate cuts are a sign of the changing dynamics in the banking sector, where profitability concerns are leading to reduced returns for customers. As the banking sector continues to adjust to these shifts, it is likely that other banks will follow suit with similar rate cuts.
Additionally, some banks have been experimenting with new ways to retain depositors, such as offering bundled services, providing incentives for longer-term deposits, or creating specialized products for high-net-worth individuals. While these moves may help banks retain customers, they also signal a change in the relationship between banks and their depositors. As deposit interest rates continue to decline, customers will need to be more proactive in seeking out better returns on their savings.
Conclusion
ICICI Bank’s reduction of savings and FD interest rates reflects a larger trend in the banking sector, driven by the RBI’s changing policies. While the changes may lead to lower returns for depositors, they also reflect the broader economic landscape and the pressures facing the banking sector. As banks adjust to these shifts, customers may need to explore alternative investment options or consider long-term deposits to secure better returns.
