Following the hike in the Cash Reserve Ratio by the RBI last week, ICICI Bank and Dena Bank have joined other banks in trimming deposit rates by 25-30 basis points.

At ICICI Bank, the cut applies to interest rates on deposits below Rs.15 lakh for 2 schemes. The 181 to 365 day and the 366 days to 2 year deposits will both avail 6.25% instead of 6.5% and 6.75% offered earlier. The special deposit schemes of the ICICI Bank however, remain unaffected. Deposits for 390 days, 590 days and 890 days will continue to enjoy the existing rates of 9.5%.

Apart from other cuts in the lower term deposits, Dena Bank has reduced its peak rates from 9.5% to 9%. The State Bank of India, Bank of Baroda, Andhra Bank and Allahabad Bank have already brought down the deposit rates. Banks have restrained any move to change rates on advances for the time being.

Meanwhile, in another measure to check inflation, the RBI issued fresh restrictions on external commercial borrowings (ECBs) by Indian companies to raise funds from overseas. Companies borrowing from abroad will not be allowed to repatriate more than USD 20 million and any repatriation below that would also require the permission of the Reserve Bank.

Checks on ECBs comprise a fraction of capital inflows into the country, which totaled USD 16.1 billion in 2006-07. FDI accounted for USD 8.4 billion, while foreign investors picked up stocks worth USD 9.6 billion. These inflows, coupled with growing forex reserves have strengthened the rupee by 15% this year.

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