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Fixed deposit rates are falling

Published: Saturday, Nov 7, 2009, 2:51 IST
By Khyati Dharamsi | Place: Mumbai | Agency: DNA

If fixed deposits (FDs) are your preferred investment option, then it won’t be profitable to delay your visit to the bank. Two leading public sector banks have decided to trim their FD rates, effective from Monday, and others are planning to follow suit.

The State Bank of India (SBI) and the Punjab National Bank (PNB) have cut rates by 0.25-0.5% on FDs of certain maturities to manage surplus liquidity in the system. About a fortnight ago, the Dhanalakshmi Bank reduced interest rates on FDs by 0.25-1%.

The SBI has brought the rate down from 6.25% to 6% on FDs of over one year to less than two years. About five months ago, the bank offered 7% on the same deposit. Also, the interest on an FD maturing between 181 and 374 days has been reduced from 5.75% to 5.25%.

The PNB has reduced rates on low and high tenures, but kept them unchanged at 5.5% and 6.5% for deposits of ‘180-364 days’ and ‘one year to less than two years’, respectively.

“With the current reduction, the highest interest rate on retail term deposits will be 7%, offered in buckets of three years and above,” the bank said in a statement on Thursday.
Banks had been expecting these cuts for some time now. Paresh Sukhtankar, executive director of HDFC Bank, had said in mid-October, “Banks expect fixed deposits to be re-priced in the October quarter from 10% to 6-7% levels.”

Two public sector banks told DNA that their “asset liability committee is scheduled to meet next week”. They said they would take a view on the rates during the meet and alterations, if any, would be announced.

CS Jain, executive director and head, personal banking, IDBI Bank, said, “Deposits for us are comfortable right now. We have received a lot of money. We will take a view.”

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