Axis Bank reduced interest rates on long tenure deposits

Axis Bank, country’s third largest private sector lender has announced cut in its deposit rates by 25-50 basis points (bps) across select longer-dated maturities. Bank said at present the liquidity situation is not as harsh as it had previously anticipated therefore it decided to reduce the deposit rates.

The rate has been reduced of two years to 30 months by 25 bps to 7.0 per cent and on 30 months to three years maturity the rates has been reduced by 50 bps to 7.0 per cent. The revised rates have come into effect from May 22.

“We initially raised rates, thinking the liquidity situation will be harsher than it is. But interest rates have not risen to that extent and, so, we decided to reassess the situation and cut rates on the two long-term maturities,” said R V S Sridhar, senior vice-president of treasury, Axis Bank.

In the past two months it is the second bank to reduce its deposit rates, earlier in mid-April Bank of India reduced its interest rates for deposits above Rs 1 crore.

According to some of the bankers, in spite of temporary liquidity squeeze on account of advance tax and 3G spectrum payments, there is less possibility of increase in medium and long term deposit rates over the next two-three months.

B A Prabhakar, executive director at public sector lender Bank of India said, “We also lowered rates about three-four weeks ago. Deposit rates are unlikely to go up for the next two months at least, because the liquidity situation is still relatively easy and we are not seeing any further tightening by RBI on the policy front.”

He added, although the banks have started raising lending rates for short tenures.

According to Ashish Parthasarthy, treasurer at HDFC Bank, “As of now, deposit and lending rates are likely to remain stable. There could be a slight increase in ultra short-term lending and deposit rates, but medium- and long-term rates are unlikely to increase for the next two months, at least”.