State Bank of India (SBI) and Bank of India have reduced interest rates on select fixed deposits following the Reserve Bank of India’s (RBI) decision last week to lower the repo rate by 25 basis points.

SBI, the country’s largest bank, has cut FD rates by 10 basis points while Bank of India has reduced rates by up to 25 basis points, effective Tuesday, signalling quicker monetary transmission amid a surplus liquidity environment.

With this move, they join a growing list of banks, including HDFC Bank, Punjab National Bank, Canara Bank and Yes Bank, in lowering FD rates.

“The RBI has shifted its monetary policy stance to accommodative, which means liquidity will remain in surplus for the foreseeable future. The lower cost of funds, driven by ample liquidity, has eased the pressure on banks to raise funds through deposits,” said a senior official of SBI.

Earlier this month, SBI withdrew a special fixed deposit scheme – Amrit Kalash – which offered 7.10% interest rate for 400 days, with effect from April 1.

On April 9, RBI’s monetary policy committee cut the repo rate by 25 basis points to 6%, its second consecutive reduction, bringing the total rate cut to 50 basis points over the past two months.

Despite a 25 basis point rate cut by the RBI in February, banks did not significantly pass it on to borrowers due to a high liquidity deficit. Bankers said tight liquidity kept their cost of funds elevated, making it difficult to transmit the rate cut to customers. With liquidity turning surplus, banks have started cutting deposit rates. Liquidity was at a surplus of Rs 1.89 lakh crore on April 10 compared to a deficit of Rs 1.3 lakh crore on March 27.

According to SBI’s website, fixed deposits below Rs 3 crore with tenures of one year to less than two years will now earn 6.7%, down from 6.8%. For tenures of two to less than three years, the rate has been reduced to 6.9% from 7%.

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Bank of India has also cut rates on deposits under Rs 3 crore. FDs maturing in 91 to 179 days will now fetch 4.25%, down from 4.5%, while those maturing in 180 days to less than a year will earn 5.75%, compared to 6% earlier. Deposits with tenures of one to two years will now get 6.75%, slightly lower than the previous 6.8%. The bank has also withdrawn its special 400-day FD scheme, which had offered 7.3% interest.

In the first week of this month, HDFC Bank had cut rates by 35 basis points for deposits maturing in 2 years and 11 months, and by 40 basis points for those maturing in 4 years and 7 months. Yes Bank has also lowered FD rates by 25 basis points on deposits for 12-24 months.

Banks’ deposits have grown slower than credit in the fortnight ending March 21, according to RBI data. Outstanding deposits grew by 10.3% while outstanding credit increased by 11% during the fortnight, showed the RBI’s weekly statistical supplement.

Outstanding deposits of banks increased to Rs 225.7 lakh crore as of March 21 from Rs 204.7 lakh crore in the same fortnight previous year. Bank credit reached Rs 182.4 lakh crore as of March 21 from Rs 164.3 lakh crore in the same fortnight previous year.