In the wake of the Reserve Bank of India's (RBI) decision to reduce the repo rate by 25 basis points, several major banks in India, including State Bank of India (SBI), HDFC Bank, Bank of India (BOI), Canara Bank, Yes Bank, and Bank of Maharashtra, have adjusted their interest rates on fixed deposits (FDs) and lending rates. These adjustments reflect a broader trend of interest rate easing, aimed at stimulating economic growth and managing inflation.

SBI's Revised FD Rates

State Bank of India (SBI), the country's largest lender, has decreased its fixed deposit rates by 10 basis points. For general citizens, the interest rate on one-year FDs has been reduced from 6.80 percent to 6.7 percent. Similarly, FDs with a tenure of two to three years now offer 6.9 percent, down from 7 percent. Senior citizens will also see a decrease in their FD interest rates, with 1-2 year tenures falling from 7.3 percent to 7.20 percent and 2-3 year tenures decreasing from 7.5 percent to 7.4 percent.

SBI's specific tenor scheme of 444 days, known as Amrit Vrishti, offers an interest rate of 7.05 percent, effective from April 15. Senior and super senior citizens are offered rates of 7.55 percent and 7.65 percent, respectively. Interest rates for other tenures remain unchanged, with rates varying from 3.5 percent to 6.5 percent for general citizens and 4 percent to 7 percent for senior citizens, depending on the tenure.

Other Banks Follow Suit

Several other banks have also reduced their FD rates:

• HDFC Bank: Cut FD rates by 35 basis points for a tenure of 2 years and 11 months and by 40 basis points for a tenure of 4 years and 7 months.
• Yes Bank: Reduced FD rates by 25 basis points for FDs with a 12-24 month tenure.
• Canara Bank: Cut rates by 20 basis points for the 444-day FD plan.
• Bank of India (BOI): Reduced FD rates for tenures between 91 days and 2 years, with the 400-day FD scheme offering 7.30 percent interest being discontinued. The rate changes are as follows:
• 91 to 179 days: 4.25 percent (previously 4.50 percent)
• 180 days to <1 year: 5.75 percent (previously 6 percent)
• 1 to 2 years: 6.75 percent (previously 6.80 percent)

Lending Rate Adjustments

In addition to FD rate cuts, several banks have also lowered their lending rates. Bank of India (BOI) has reduced its lending rates by 25 basis points, making home loans more accessible with an adjusted rate of 7.90 percent based on the borrower's CIBIL score. Similarly, Bank of Maharashtra has reduced its repo rate-linked lending rate from 9.05 percent to 8.8 percent. Canara Bank, HDFC Bank, Kotak Mahindra Bank, and Yes Bank have also implemented lending rate cuts.

Market Impact and Expert Views

The banking sector has responded positively to these rate adjustments. On April 15, banking stocks rallied, with IndusInd Bank leading the gains with over 6 percent on the NSE. HDFC Bank, Axis Bank, and ICICI Bank also saw surges of up to 3.3 percent. Market expert Anil Singhvi views these rate cuts as the start of a larger interest rate easing cycle, which is beneficial for the stock market and the economy.

Singhvi recommends focusing on quality private sector banks like HDFC Bank, ICICI Bank, and Kotak Mahindra Bank for long-term investment, as these banks are fundamentally strong and will benefit from the RBI’s accommodative policy.

RBI's Policy Shift

The Reserve Bank of India (RBI) lowered the key policy rate by 25 basis points to 6 percent in its first bi-monthly monetary policy review, taking into account the inflation level and improvements in the inflationary outlook. The monetary policy committee also decided to change its stance from 'neutral' to 'accommodative,' indicating a willingness to support growth while keeping inflation in check.

These coordinated rate cuts by banks and the RBI's policy shift are expected to reduce borrowing costs, boost credit growth, and improve profit margins for lenders, thereby fostering economic growth in the coming quarters.