With the Reserve Bank of India scheduled to review its monetary policy next week and high expectations of another round of rate cut in the market, chances are interest rates on bank FDs are going to drop sharply if RBI decides to bite the bullet. Banks have already given such indications.

State Bank of India has already reduced fixed deposit rates by 0.25 per cent in tenures up to 240 days.

Central Bank of India's chairman and managing director MV Tanksale and Corporation Bank's CMD Ajai Kumar said they would wait for the RBI move on June 18 to take a final call on their deposit rates.

"We will take a call on the reduction of deposit rates after the mid-term policy," Vijaya Bank executive director Subhalakshmi Panse said on Tuesday. She said the entire cost structure and overall deposit growth would be taken into account before reducing rates on fixed deposits.

Banks say the mid-term policy review on June 18 will bring clarity on the cost structure of the banks and help them take a decision on FD rates. "It depends on the fund management position of different banks," Dena Bank general manager (financial management, IRC, treasury & ID) Sudhir Kumar Jain said. He said banks would factor in the availability of funds before deciding on reducing deposit rates.

Last fiscal, banks' deposits grew 13.4 per cent to Rs 60.72 trillion in the year to March 23 below the RBI's projection of 17 per cent.

"As most of the fixed deposit rates are of one year or more than one year tenure, the reduction by SBI is not indicative of a trend. I expect that banks will not reduce fixed deposit rates until liquidity situation improves in the system," said Vaibhav Agrawal, vice-president for research at Angel Broking.