In a significant move impacting depositors, private sector lender IDFC First Bank has implemented a substantial reduction in interest rates offered on savings accounts. The revised rate card, effective from 9 January, marks one of the sharpest cuts by a private bank in recent months, with rates slashed by up to 200 basis points for certain customer segments.
Details of the Revised Rate Structure
The bank has overhauled its interest rate slabs, leading to lower returns for a wide range of account holders. Under the new regime, the popular slab for balances between ₹1 lakh and ₹10 lakh will now earn an interest of 5% per annum. This represents a steep 200-bps drop from the 7% rate previously offered for the ₹5 lakh to ₹5 crore bracket, a slab that had been instrumental in attracting substantial retail and high-net-worth deposits to the bank.
Interest rates for other slabs have also been adjusted. The rate for balances below ₹1 lakh remains unchanged at 3%. For deposits in the ₹10 lakh to ₹10 crore range, the new interest rate is set at 6.50%, down from the 6.75% offered earlier for the ₹5 crore to ₹10 crore band.
Slabs Where Rates Remain Unchanged
The bank has kept rates steady for very large deposits. The interest rate for the ₹10 crore to ₹25 crore slab stays at 6%. Similarly, rates for balances up to ₹100 crore remain at 5%, and for amounts exceeding ₹100 crore, the interest rate continues at 4%.
Context and Implications for Customers
This decision by IDFC First Bank comes at a time when the banking sector is grappling with strong credit growth outpacing deposit mobilization. The move aligns with a broader monetary easing cycle, as the Reserve Bank of India (RBI) reduced the policy repo rate by 25 bps last month, bringing total rate cuts in 2025 to 125 bps.
For customers, the rate cut signals lower returns on idle savings held in these accounts. This development may prompt individuals and businesses to consider shifting surplus funds towards alternative investment avenues that potentially offer higher yields. The bank clarified that interest will continue to be calculated on a progressive basis on daily end-of-day balances and credited monthly, in compliance with RBI guidelines.
The revision underscores the ongoing challenges for banks in managing their cost of funds while navigating a dynamic economic landscape influenced by central bank policy.
