Bucking the trend of rising interest rates, the country's third-largest private sector lender, Axis Bank, has cut deposits rates by 25-50 basis points (bps) across select longer-dated maturities, saying the liquidity situation is less harsh than it had previously anticipated. The bank has cut the interest rate on fixed deposits of two years to 30 months by 25 bps to 7.0 per cent and on 30 months to three years maturity by 50 bps to 7.0 per cent. The revised rates are effective from May 22. "We initially raised rates, thinking the liquidity situation will be harsher than it is. But interest rates have not risen to that extent and, so, we decided to reassess the situation and cut rates on the two long-term maturities," said R V S Sridhar, senior vice-president of treasury, Axis Bank. It is the second bank to lower deposit rates in the past two months. Bank of India had lowered interest rates for deposits above Rs 1 crore in mid-April. According to bankers, notwithstanding the temporary liquidity squeeze on account of advance tax and 3G spectrum payments, medium- and long-term deposit rates are unlikely to rise over the next two-three months. "We also lowered rates about three-four weeks ago. Deposit rates are unlikely to go up for the next two months at least, because the liquidity situation is still relatively easy and we are not seeing any further tightening by RBI on the policy front," said B A Prabhakar, executive director at public sector lender Bank of India. However, lending rates for short tenures had started rising, he added. "As of now, deposit and lending rates are likely to remain stable. There could be a slight increase in ultra short-term lending and deposit rates, but medium- and long-term rates are unlikely to increase for the next two months, at least," said Ashish Parthasarthy, treasurer at HDFC Bank. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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