Bank customers, who have been struggling to access funds from savings accounts in the wake of the demonetisation, now face the prospect of earning less on their deposits as banks awash in liquidity have lowered deposit rates.
State Bank of India (SBI), which received Rs.1.27 lakh crore from customers depositing the withdrawn Rs.500 and Rs.1,000 currency notes between November 10 and 17, has cut deposit rates by 0.15 percentage point on some maturities. The country’s largest lender will now pay 6.9 per cent for deposits made for periods ranging from 1-year to 455 days, compared with the 7.05 per cent offered earlier.
ICICI Bank, the country’s largest private-sector lender, also reduced deposit rates by 15 basis points.
The bank will now offer 7.10 per cent on deposits for 390 days to 2 years as compared with 7.25 per cent offered earlier.
The new rates at both the banks came into effect from Thursday.
According to a senior SBI official, most of the deposits that are coming to the banks following the currency ban are flowing into the savings account.
Low-cost depositsDeposits in savings and current accounts are considered as low cost deposits since they offer lower interest rates which in turn help reduce banks’ cost of funds.
Still, bankers said while deposits had been pouring in, some of the funds were likely to be withdrawn once the currency note situation returned to normal as some of this money belonged to the category of cash that households typically kept aside for emergencies.
RBI dataAccording to latest data from the RBI, deposits in the banking system grew 9.8 per cent year-on-year, as on October 28, a slower pace of deposit growth from the 10.5 per cent pace posted a year earlier.
During the same period, credit growth at commercial banks was 9.1 per cent, compared with 8.8 per cent a year earlier, the RBI data showed.
