India’s Axis Bank has once again cut interest rates on fixed deposits by 25 basis points to 8.50 percent on fixed deposits. The changes apply to to deposits with are set to mature within one year and 18 months. It is the second time this year that the Indian bank has cut its rates in an effort to lower its cost of funds following muted credit growth.
Earlier, in September 2012, the bank had lowered interest rates on deposits maturing between one year and 18 months by 25 basis points (bps) as well, to 8.75 percent. Deposits maturing between 18 months and five years were cut by 25 bps to 9 percent.
According to our sources, in the fortnight preceding September 21, 2012, Axis Bank deposits grew by 13.66 percent y-o-y, pushing the outstanding amount to Rs 62,90,874 Crore. Bank deposits also contracted by Rs 30,152 Crore during the same fortnight; which was a result of other major players cutting their interest rates on term deposits. Banks that cut their interest rates included ICICI bank, Union Bank, SBI, HDFC Bank as well as Bank of India, which also cut its deposit rates on some short term maturities by 25 bps.
Banks will be looking to cut down high cost bulk deposits with liquidity having eased in the past few months. These deposits have dipped by 300 basis points from March highs, according to some analysts.