Mumbai, Nov. 13: IDBI Bank today slashed its interest rates on term deposits by 25 to 75 basis points, taking a cue from the State Bank of India (SBI) and ICICI Bank, which had announced similar cuts earlier.

The rate of interest on 360-day deposits has been reduced by 75 basis points to 8.75 per cent a year.

The bank pruned the interest rates on deposits with a tenure of between 500 and 800 days over five years and tax-saving deposits by 50 basis points to 9 per cent a year.

IDBI also realigned interest rates for deposits of less than 360 days and more than two to three years by 25 to 50 basis points.

“Anticipating a huge credit growth, the banks had offered high deposit rates to woo depositors and in the process increased their cost of funds. In the recent past, credit growth has slowed down, thereby squeezing margins. Thus, banks are now left with no other option but to cut the interest rates they offer on term deposits,” said a banking analyst.

At the start of this month, ICICI Bank, the country’s largest private sector lender, cut interest rates on its special deposit schemes by 0.25 to 0.5 per cent effective from November 12.

The bank also set interest rates for deposits of greater than one year at 8 per cent. The interest rate on a 390-day deposit has been reduced to 8.5 per cent, while that on a 590-day deposit will be 8.75 per cent against 9 per cent earlier.