Explained: Are Bank Fixed Deposit Rates Coming Down?

Following RBI’s directive to reduce the CRR (Cash Reserve Ratio), banks are expected to maintain existing deposit rates.

Notably, the infusion of ₹1.16-lakh-crore into the banking system via reduced CRR will help banks to maintain existing deposit rates. Deposit rates have reached their peak, and special deposit schemes are unlikely to be tinkered until the end of the fiscal year.

"One can safely say that deposit rates will be stable at current levels. They will be on hold with a downward bias. The liquidity infused via CRR will benefit all banks," said PR Rajagopal, executive director of Bank of India. “Each bank will, of course, take stock of rates in different buckets noting the demand for credit,” Rajagopal told ET.

Will we see a reduction in bank's fixed deposit rate?

Jaideep Iyer, head of strategy at RBL Bank said “Deposit rates will stay where they are. Banks will want to still make sure of the durability of liquidity and hence will not cut rates in a hurry," said Jaideep Iyer, head of strategy at RBL Bank.” He added “The upward bias in deposit rates is probably over, but for rates to come down a definitive signal is awaited - like a cut in the repo rate.”

Recently, banks have introduced special programmes to attract deposits. State Bank of India (SBI) introduced the Amrit Vrishti scheme. It offers an interest rate of 7.25% on 444-day fixed deposits.

Sanjay Mudaliar, executive director of Bank of Baroda said, “Expectations are that agriculture output will improve from here on, which will cool food prices and bring inflation down. This could open the space for a cut in the repo rate, which may well be the signal for deposit rates to move downwards.”

Notably, RBI’s next monetary policy committee meeting will be held on February 7, 2025.