Ahead of RBI's annual credit policy announcement, state-owned Oriental Bank of Commerce (OBC) has slashed fixed deposit rates by up to 0.5%, a development which could signal a reversal of the high interest rate regime.
The bank reduced interest rate on fixed deposits with maturity between 1-2 years by 0.25% to 9.50%, OBC said in statement.
For term deposits worth Rs 15 lakh to Rs 1 crore with maturity between 46-90 days, the new interest rate will be 0.5% lower than the existing 9%, it said.
The new rates would be effective from tomorrow.
Meanwhile, the bank has already reduced base rate or minimum lending rate by a marginal 0.1% effective April 11.
The bank has reduced the base rate to 10.65% from 10.75%, the statement said.
"We have taken a bold decision ahead of the RBI policy. There are some events in the last few months that have enabled us to take this decision and pass on the cost benefit to our customers," OBC Chairman and Managing Director S L Bansal said.
The reduction in base rate will make all kind of loans, including housing and auto loans cheaper by at least 0.1%.
Further the bank has increased its rate of interest for deposits applicable for senior citizens from 0.5% to 0.6% over and above the card rate.
Interestingly, some of the large public sector banks like Bank of Baroda and Bank of India raised their deposit rates upwards last month.
Increase in the fixed deposit rates by these banks was due to tight liquidity situation.
To improve liquidity in the system, RBI in March had reduced the cash reserve ratio (CRR)-- the portion of deposits banks require to keep with the central bank -- from 5.5% to 4.75%.
With the reduction, the central bank pumped in Rs 48,000 crore in the economy.
