Two leading banks Punjab National Bank (PNB) and Axis Bank today slashed interest rate on fixed deposits by 0.25 per cent on select maturities, a move which could be seen as precursor to a cut in lending rates.
The reduction will be effective from June 8, state-owned PNB said in a statement.
Private sector Axis Bank has slashed term deposit rate on various maturity by up to 0.25 per cent effective June 9.
One-year deposit would now attract a lower 0.1 per cent interest rate to 8.3 per cent while interest rate on 11-12 months fixed deposit has been lowered to 8 per cent from 8.25 per cent.
The decision to cut interest rate on fixed deposits comes a day after RBI reduced key policy rate.
As part of its second bi-monthly monetary policy review, RBI cut the repo rate (short-term lending rate) from 7.5 per cent to 7.25, but left other policy tools like cash reserve ratio unchanged at 4 per cent and Statutory Liquidity Ratio (SLR) at 21.5 per cent.
Following policy action, several banks, including market leader State Bank of India reduced its base rate or minimum lending rate to 9.70 per cent from 9.85 per cent effective June 8.
Another state-owned Allahabad Bank cut base rate 0.30 per cent to 9.95 per cent, while Dena Bank, Punjab & Sind Bank reduced their base rate by and 0.25 per cent each.
Dena Bank and Punjab & Sind Bank lowered their base rate to 10 per cent. With the reduction, all loans linked to the base rate will come down proportionately.
IDBI Bank, however, has reduced bulk deposit rate, a move which is a precursor to a cut in lending rate.
Other banks are likely to follow suit in the next few days.
