Banks would factor in the availability of funds before deciding on reducing fixed deposit rates

Mumbai: Mid-size public sector banks would wait till the mid-term policy review by the Reserve Bank of India (RBI) before taking a call on reducing interest rates on fixed deposits (FDs), top officials said on Monday, reports PTI.

"We will take a call on the reduction of deposit rates after the mid-term policy," Subhalakshmi Panse, executive director of Vijaya Bank, told PTI.

She said that the entire cost structure and overall deposit growth would be taken into account before reducing rates on fixed deposits.

Interestingly, deposit growth registered by Indian banking system fell short of RBI's target last financial year amid liquidity crunch faced by the lenders.

Last fiscal, banks' deposits grew 13.4% to Rs60.72 lakh crore in the year to March 23, below the RBI's projection of 17%.

Country's largest lender, the State Bank of India (SBI), recently reduced fixed deposit rates by 0.25% in tenors upto 240 days.

Bankers said that mid-term policy review on 18th June will bring clarity on the cost structure of the banks and help them take a decision on FD rates.

"Basically, it depends on the fund management position of different banks," General Manager (Financial Management, IRC, Treasury & ID) of Dena Bank, Sudhir Kumar Jain said.

He also said that banks would factor in the availability of funds before deciding on reducing deposit rates.

Central Bank of India's chairman and managing director MV Tanksale and Corporation Bank's CMD Ajai Kumar had also opined that they would wait for the RBI move on 18th June to take a final call on their deposit rates.

Presently, liquidity deficit in the system is hovering around Rs1 lakh crore, much above the RBI's comfort level of around Rs60,000 crore.