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Major Indian Banks Slash Savings Account Interest Rates Amid Deposit Slowdown

Banking and Insurance

Business Honor
19 April, 2025

Lower interest rates may push savers toward fixed deposits and other investments.

India's leading banks—HDFC Bank, ICICI Bank, Axis Bank, and Federal Bank have— recently reduced interest rates on savings accounts to manage costs and protect margins. The new rates of most of these banks currently range around 2.75% for less than ₹50 lakh. SBI, the country's biggest bank, has been offering 2.7% on less than ₹50 lakh since 2022.

This move comes when banks are observing a slowdown in growth in deposits, especially in savings and current accounts, also known as CASA deposits. Over the past year, the average CASA ratio has decreased from 39% to 22%.

This decrease means banks are receiving less low-cost funding, putting their profit margins under pressure.

Through cuts in savings rates, banks seek to reduce funding costs. Professionals think this will provide a low yield boost and allow banks to maintain profitability levels. Some banks have also reduced fixed deposit prices.

Despite the cut in the savings rate, analysts do not see a drastic shifting of funds to other investment channels. Fixed deposits, with a higher payout of around 7%, have already been selected by some of the depositors.

Last year, banking deposits grew a little over 10%, while loans grew a little higher at 11%. Banks are now trying to pace this growth with cost containment. Through early April 2025, deposits grew by 2.4% in two weeks, over double the loan expansion for the same period.

Market experts believe that other banks will follow suit. They consider it a readjustment in the long term and not as a short-term reaction. The focus is on maximizing funds and being profitable in a changing financial environment.