In response to the Reserve Bank of India (RBI) lowering the repo rate by 25 basis points, several major banks, including HDFC Bank, State Bank of India (SBI), and Bank of India, have started reducing their deposit interest rates. These changes reflect a broader trend in the banking sector, influenced by the central bank's move to ease liquidity conditions.
HDFC Bank
HDFC Bank, the largest private sector bank in India, has reduced the interest rate on its savings accounts. For balances up to Rs 50 lakh, the interest rate is now 2.75%, while balances above Rs 50 lakh will earn 3.25%, down from 3.5%. This rate cut follows the broader trend of shifting customer preferences, with savings accounts being primarily used for transactional purposes, and many customers opting for fixed deposits (FDs) to secure better returns. HDFC Bank has not increased its savings account interest rates in over 14 years, and this cut marks a continuation of the gradual decline from the peak of 4% in 2011.
Additionally, HDFC Bank lowered its fixed deposit rates by 35–40 basis points starting April 1, aligning with the anticipated reduction in the repo rate. Other banks, such as Yes Bank and Bandhan Bank, have followed suit, trimming their FD rates by similar margins, while Bajaj Finance reduced FD rates for longer tenures by 0.25%.
State Bank of India (SBI)
SBI, India's largest public sector bank, has also revised its fixed deposit interest rates starting April 15. FDs for 1 to 2 years now earn 6.70%, down from 6.80%, and FDs for 2 to 3 years offer 6.90%, down from 7.00%. Senior citizens benefit from slightly higher rates, ranging from 4% to 7.5%, including the "SBI We Care" scheme. Additionally, SBI has reintroduced its “Amrit Vrishti” special FD scheme, which offers a tenure of 444 days with adjusted interest rates.
Bank of India
Bank of India has made adjustments to its interest rates for certain short- and medium-term fixed deposits starting April 15. The bank has withdrawn its 400-day special FD scheme that previously offered up to 7.3%. For FDs under Rs 3 crore, the interest rate for a 91–179 day deposit is now 4.25%, down from 4.5%. For a 180-day to under 1-year FD, the rate is 5.75%. The one-year FD rate has increased to 7.05% from 6.8%, while deposits for 1 to 2 years now earn 6.75%, down by 5 basis points.
For large deposits (Rs 3 crore and above), the interest rates have also been reduced. For tenures between 91 and 179 days, the rate is now 5.75%, down from 6%. Similarly, for tenures between 180 and 210 days, the rate is now 6.25%, down from 6.5%.
Market Implications
The rate cuts by these major banks reflect broader shifts in India’s banking landscape, where customers are increasingly opting for more secure fixed deposits rather than relying on savings accounts for returns. With savings account interest rates now lower, many people are looking to maximize returns by moving their funds into FDs. This trend is also evident in the strategies of the banks themselves, as they adjust rates to manage their funding costs and protect their margins.
These changes come in the wake of the RBI’s decision to lower the repo rate, which impacts borrowing and lending costs across the economy. As the cost of borrowing decreases, it puts additional pressure on banks to manage their deposit rates, which have traditionally been a major component of their funding strategies. With this adjustment in deposit interest rates, banks are signaling a shift towards optimizing their operations in the face of changing economic conditions.
