Few banks’ retail deposit rate unchanged even after RBI cut

Tags: Banking
The 50 basis points (bps) repo rate cut by the Reserve Bank of India (RBI) on April 16 has not deterred some banks from continuing with the deposit rates they were offering earlier. HDFC Bank, Yes Bank, Bank of India, HSBC India, Allahabad Bank, and City Union Bank were among those banks which have not cut their retail deposit rates. Retail deposits are primarily considered to be those of value below Rs 15,00,000.

This was contrary to the 25 bps cut effected by the two largest banks in the country — State Bank of India (SBI) and ICICI Bank. The former cut its retail one-year term deposit rate from 9.25 per cent to 9.00 per cent effective from April 24, while the latter reduced it from 8.25 per cent to 8.00 per cent effective from April 23.

Manish Sinha, head of consumer assets at HSBC India said, “Post rate changes by RBI, we have been closely monitoring our external environment on pricing changes, and will continue to do so. We have not seen any significant changes in the market in the past one month on fixed deposit rates, and we would continue with our strategy to be aggressively priced.”

For major banks that did not cut their retail deposit rates, the one-year deposit rates ranged from 9.00 per cent in the case of HDFC Bank, HSBC India and Yes Bank, to 9.25 per cent for Bank of India. For a little over one year, that is, for a period of one year and 16 days, HDFC Bank offers 9.25 per cent interest rate.

Rajat Monga, chief financial officer at Yes Bank said, “We have a definite strategy to increase retail deposits. For us, 30-35 per cent of the deposit book consists of retail deposits.”

Retail deposits are priced lower than bulk deposits. Some banks were offering bulk deposit (having value greater than

Rs 15,00,000) rates of 9.5-10 per cent. In its mid-April credit policy statement, RBI had said it wanted the differential to narrow between the bulk deposits and retail deposits. An analyst said a few banks were trying to garner additional retail deposits to replace their bulk deposits, in order to protect their net interest margins.




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