Banks to lower deposit rates in April 2025

Banks are expected to lower deposit rates starting in April. This change comes as lenders seek to maintain their profit margins amid falling credit demand and a likely cut in the central bank's repo rate. Recently, the Reserve Bank of India reduced the repo rate by 25 basis points, but many banks, including the State Bank of India (SBI), have not yet adjusted their deposit rates. Lenders are worried that cutting rates too soon could lead to a drop in deposits, especially as this period usually sees high loan demand. Bank executives believe that if another repo rate cut occurs in April, it will push banks to reduce deposit rates. This would help them lower the costs for borrowers as well. Rajneesh Karnatak, the CEO of Bank of India, mentioned that deposit rates are expected to drop starting April, aligning with the decrease in the repo rate. He noted that this shift could improve net interest margins for banks. However, changing deposit rates takes time because existing deposits will continue paying unchanged rates until maturity. Currently, banks are facing challenges with liquidity, which has been negative since mid-December. Despite recent efforts from the Reserve Bank of India to improve the situation, liquidity remained tight, leading to concerns about the timing of potential deposit rate cuts. Experts indicate that banks are competing hard for deposits, and any cuts might first affect short-term deposit rates, while long-term rates may not fall as much. Smaller banks might reduce rates sooner than larger ones, but major lenders need to manage their loan-to-deposit ratios before proceeding with cuts. Overall, any decisions on lowering deposit rates are likely to be cautious, as banks remain vigilant to changes in credit demand and liquidity levels.