Hyderabad: In a move that hints at a cut in lending rate, major banks have reduced their fixed deposit rates by up to 0.25 per cent in the backdrop of cash deluge caused by demonetisation of high value bank notes. The banks which cut fixed deposit rate on Thursday include ICICI Bank, HDFC Bank, Canara Bank and United Bank of India. On Wednesday, SBI slashed fixed deposit rates on select maturities by up to 0.15 per cent.
The cut in fixed deposit rates is typically followed by a reduction in lending rate in the next few days. Axis Bank has already cut marginal cost of fund-based lending rate by 0.15-0.20 per cent. This newspaper had already reported that the flood of cash at banks would force them to cut their loan rates, leading to a reduction in EMIs that people pay for home loans, personal loans and education loans.
According to estimates, banks have collected cash deposit of over Rs 4 lakh crore following the demo-netisation announced on November 8 by Prime Minister Narendra Modi. Till Wednesday, SBI alone collected Rs 1,14,139 crore in deposits over the last seven days after the government announced to scrap high value notes.
Lower inflationary exp-ectation caused by demo-nitisation is also expected to allow RBI to have more room to lower key policy rate. While demonitisation may be helping banks in cutting their cost of funds, it is having adverse impact on their normal banking operations such as cheque clearances and loan disbursements are suffering as most of the staff has been pressed in for exchange and deposit of the scrapped notes.
In a letter written to finance ministry, All India Bank Officers' Confederation (AIBOC), general secretary Harvinder Singh said safety of the staff particularly women is at risk as public is losing patience. Normal banking activities of commercial importance are suffering due to the problems of access to the bank and also the need to deploy more staff to cash counters and floor management, the letter addressed to financial services secretary said.
The pressure of queues and need to verify identity is so enormous that mistakes are inevitable for which the employee alone cannot be held responsible and penalised, it said while welcoming the idea of demonetisation aimed at curbing black money.
