The country’s largest private sector bank, ICICI Bank, has decided to cut deposit rates by 25-50 basis points.

The announcement comes in the backdrop of the latest hike by 50 basis points in the cash reserve ratio announced by the Reserve Bank of India in its credit policy statement. Ironically, interest rates on special deposit schemes remain unchanged, and ICICI Bank continues to offer rates at 9.5% on term deposits of 390 days, 590 days and 890 days.

ICICI Bank reduced interest rates on deposits less than Rs 15 lakh for two schemes. The interest rate for the 181-365-day scheme will be cut to 6.25% from 6.5% and that for the 366-day to 2-year scheme will be cut to 6.25% from the existing 6.75%. A decision on lending rates, however, will not be considered as of now, said ICICI Bank executive director V Vaidyanathan.

The impact of the CRR hike, coupled with finance minister P Chidambaram’s indication to banks on reduction of deposit rates, has resulted in a lot of public sector banks already announcing a cut in deposit rates.

State Bank of India cut deposit rates on Monday while Bank of India, Bank of Baroda and Allahabad Bank had announced plans to lower deposit rates on the same day the central bank raised CRR.

Dena Bank has also reduced its deposit rates across tenors, with peak rates declining from 9.5% to 9%. “This cut in rates has come about as a direct reaction to the recent CRR hike,” explained Mr Vaidyanathan.