ICICI Bank, the second-largest private sector lender, on Wednesday reduced interest rates on its savings accounts by 25 basis points (bps), following the similar moves by HDFC Bank and Axis Bank.
Savings account balances of up to Rs 50 lakh will now earn 2.75%, down from 3%. For balances above Rs 50 lakh, the interest rate has been cut to 3.25% from 3.5%.
HDFC Bank and Axis Bank had earlier reduced their savings deposit rates to 2.75% for balances up to Rs 50 lakh, marking a broader trend among lenders to lower deposit costs.
Largest lender State Bank of India currently offers 2.70% on savings bank deposits.
The rate cuts come in the wake of the Reserve Bank of India’s monetary policy committee cutting the repo rate by 25 bps to 6%, its second consecutive cut this year following a similar move in February.
By lowering savings deposit rates, banks aim to reduce their overall cost of funds, thereby boosting net interest margins (NIMs) — the difference between interest earned on loans and paid on deposits. Higher NIMs support profitability, especially amid a steady or rising credit demand.
However, the move is a setback for depositors, who may now seek higher-yielding alternatives to park their funds.
Largest lender State Bank of India (SBI) currently offers 2.70% on savings bank deposits.
Several banks have also pared term deposit rates in recent weeks. SBI, HDFC Bank, Punjab National Bank, Canara Bank, Bank of India and Yes Bank have reduced their fixed deposit rates by 25 bps.