Interests earned by fixed deposits in banks will now earn less interests post the rate cuts introduced by the Reserve Bank of India. The cut in cash reserve ratio (CRR) by 25 basis points will relieve the liquidity deficit faced by bankers across the country. This will decrease the cost of funds leading to improvement in liquidity but reduction in fixed deposit rates.

Some bankers feel that the reduction in rates is an indication of a decline in interest rates which will ease the prevailing monetary conditions.

Reportedly, the interest rates in deposits segment will now be at a maximum of 9 percent, as per the deposit amount and the deposit tenure across banks.

Talking on the matter, the Managing Director of Karur Vysya Bank, Mr. Venkataraman said that KVB has already slashed term deposits interest rates and following this step by the central bank, the interest rates could be reduced further.

Banks will reportedly make a call in determining the interest rates on retail loans and deposits after the meeting of the asset-liability committee (ALCO) of each these banks. Then, there will be a clear cut picture on the amount of reduction in deposit rates by each bank.