The third largest lender of the country, Axis Bank has slashed interest rates on deposits by 25-50 basis points on selected maturities.

Interest rates on fixed deposits having a tenor of two years to 30 months have been slashed by 25 basis points to 7%. Deposits maturing within 30 months to three years will see a drop in rates by 50 bps to 7%.

The revised rates would come into effect from May 22.

"We initially raised rates, thinking the liquidity situation will be harsher than it is. But interest rates have not risen to that extent and, so, we decided to reassess the situation and cut rates on the two long-term maturities," said R V S Sridhar, senior vice-president of treasury, Axis Bank.

Assessing the liquidity condition of the system, considering the upcoming lending for 3G auctions and advance tax payment, bankers say that deposit rates are unlikely to rise in the coming 2-3 months.

"We also lowered rates about three-four weeks ago. Deposit rates are unlikely to go up for the next two months at least, because the liquidity situation is still relatively easy and we are not seeing any further tightening by RBI on the policy front," said B A Prabhakar, executive director at public sector lender Bank of India.

"As of now, deposit and lending rates are likely to remain stable. There could be a slight increase in ultra short-term lending and deposit rates, but medium- and long-term rates are unlikely to increase for the next two months, at least," said Ashish Parthasarthy, treasurer at HDFC Bank.