ICICI, HDFC Bank slash deposit rates by up to 50 bps

Two of the biggest private sector lenders ICICI Bank and HDFC Bank have effected a cut of up to 0.50 per cent in term deposit rates following tepid credit growth and ease in money market rates.

The moves come amid rising expectations of a lower rate regime. Reserve Bank Governor Raghuram Rajan had also expressed disappointment at banks for not cutting lending rates despite a steep fall in money market rates for many months.

ICICI Bank, the largest private sector lender, cut its deposit rate offering in the 390-days to two-year buckets by 0.25 per cent to 8.75, according to its website.

"ICICI Bank has reduced rates in select tenures of retail deposits given the improving liquidity environment and systemic trends," the bank spokesperson said.

HDFC Bank too cut its retail deposit rates by 0.25-0.50 per cent in the 46-days to under-one year bucket.

The reduction has been due to deposit growth outpacing credit growth, a drop in the money market rates and aligning with the competition which has already cut the rates, a bank's treasury head Ashish Parthasarthy said.

ICICI Bank revised its rates on November 28, while HDFC Bank did it on December 1. Both the banks put up the revised rates on their websites.

Smaller lender Yes Bank may also join the fray, its chief financial officer Rajat Monga said.

Deposit rate cuts are generally seen as a precursor to a cut in the lending rate as the base rate or minimum rate of lending formulas are based on the cost of deposits.