Skip to content
Free updates Login
BankingNABARD / RBI

Deposit Rate Cuts Likely Modest in RBI’s Easing Cycle

15 April 20251 min read
BANKING & FINANCEDeposit Rate CutsLikely Modest inRBI’s Easing Cycle15 April 2025safalsetu.com

Why in the news

Banks are expected to lower deposit rates only gently this time, even as the RBI eases policy.

Key facts

  • Repo cuts so far: 50 bps (February and April 2025, 25 bps apiece).
  • Expected total: about 100 bps, versus 250 bps in 2019-22.
  • In that earlier cycle, term deposit rates fell 209 bps (retail) and 259 bps (bulk plus retail).
  • Cuts so far by banks: HDFC Bank 35-40 bps on FDs; Bank of India 25 bps; Yes Bank up to 25 bps; Canara up to 20 bps; Kotak 15 bps; SBI 10 bps.

Factors limiting cuts

  • Credit-deposit ratios above 80%.
  • Revised LCR norms, delayed a year.
  • Possible rise in deposit insurance cover, lifting funding cost.
  • Deposits come largely from middle-aged and senior citizens needing stable returns.

Transmission and depositor behaviour

  • Pass-through is slow due to a liquidity deficit and competition for deposits.
  • Savers lock into short and mid-term FDs and shift from savings accounts; 1-3 year tenures suit senior citizens.

Exam angle

  • Related terms: repo rate, CD ratio, LCR, basis point.

Test yourself

1. How much has the RBI cut the repo rate in the current cycle, per the notes?

25 bps each in February and April 2025 gives 50 bps.

2. What was the repo rate easing in the 2019-2022 cycle, as mentioned in the notes?

The earlier cycle saw about 250 bps of cuts.

3. Which bank cut FD rates by 35-40 bps in the current cycle?

HDFC Bank reduced FD rates by 35-40 bps.

This topic is part of Daily Current Affairs 15 April 2025 (22 topics).

All topics of the dayDay quizApril 2025

Read more