Banks May Delay Cutting Special Deposit Rates

Special Deposit Schemes & Expiry

• Many banks launched high-interest fixed deposit schemes with March 31 deadlines
• Despite the expiry, most banks may not withdraw them immediately
• Some may extend these schemes with lower rates

Key Factors Affecting Interest Rate Decisions

• Banks are assessing liquidity conditions and RBI’s monetary policy before making changes
• Wholesale market rates have moderated, but retail rates remain unchanged due to year-end demand
• RBI’s expected rate cuts and government spending boost may lead to deposit rate reductions

Special Deposit Schemes from Major Banks

• SBI Amrit Vrishti:
  • 7.25% for 444 days
  • 7.75% for senior citizens
• SBI 400-day FD: 7.10%
• HDFC Bank:
  • 7.35% for 35 months
  • 7.85% for senior citizens

Expected Changes in Deposit & Lending Rates

• Credit demand remains high in March, keeping FD rates steady
• Deposit rates expected to fall in April-June 2025 as liquidity improves
• RBI dividend in May may further ease liquidity, accelerating deposit rate cuts
• Lending rates may decline first, pushing banks to lower deposit rates to maintain margins

Deposit vs. Credit Growth Trends

• Deposit growth (10.2% YoY, ₹225.1 lakh crore) lags behind credit growth (11.1% YoY)
• Banks have been offering higher FD rates to strengthen deposit bases
• High credit-to-deposit ratios may prompt banks to control credit expansion

Outlook

• Rate cuts likely after April, with sharper declines following RBI’s monetary easing measures
• Banks will adjust deposit rates gradually to balance liquidity and lending profitability