Kotak Mahindra Bank has become the latest lender to cut retail deposit rates, slashing them by 15 to 20 bps for various maturities, effective December 6.
Last week, three major private sector banks — ICICI Bank, HDFC Bank and Axis Bank — had cut rates on retail term deposits following a similar reduction by State Bank of India. Earlier in November, Bank of India and Bank of Baroda had cut rates.
“Banks are cutting deposit rates because there is ample liquidity amid a lack of deployment opportunities,” said an executive director of a Mumbai-based public sector bank.
Canara Bank, on other hand, has stood its ground, offering the highest rate of interest on fixed deposits maturing between one and two years at 9.05%. It is followed by PNB and OBC at 9%.
Among the private sector lenders, Yes Bank and IndusInd bank have both refrained from cutting deposit rates. They offer the highest interest on retail deposits of more than one year among private lenders at 9% to 9.10%, respectively.
The pressure to bring down lending rates to be competitive in the loan market and keep margins from narrowing could prompt banks to further cut deposit rates in the next one month. Most bankers point out that lending rates are expected to come down as early as January-March.