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Thursday 2 April 2020

SBI cuts interest rates on fixed deposits up to 0.5%

The SBI bank has slashed the interest rate for the fixed deposits with a maturity of 7-45 days to 4.5% from the existing 5%

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New Delhi: The country’s largest lender State Bank of India (SBI) on Friday slashed interest rates on fixed deposits across various tenure by up to 0.5 percentage point, a move that will lower returns for savers.

In view of the falling interest rate scenario and surplus liquidity, SBI realigns its interest rate on term deposits with effect from 26 August 2019, SBI said in a statement. The move to reduce the interest rate on fixed deposits by the country’s largest lender is expected to be followed by other lenders. The bank has slashed retail term deposit rates by 10-50 basis points across tenors as well as bulk term deposit rates by 30-70 basis points across tenors, it said.

The bank has slashed the interest rate for the fixed deposits with a maturity of 7-45 days to 4.5% from the existing 5%. The rate reduction 46-179 days, 180 days to less than one-year maturities baskets is 25 basis points (0.25 percentage point) at 5.5% and 6% respectively while for maturity bucket of 1-2 years is only 10 basis points at 6.70%.

For top maturity period of 5-10 years, the decrease is again 25 basis points at 6.25%. The bank also said that it has retained interest rate on savings bank deposit at 3% for customers with balances above Rs 1 lakh with a view to protecting the interest of savings bank depositors. Customers with SB balance up to Rs 1 lakh will continue to get the rate of interest at 3.50% despite the cut in the repo rate by the RBI earlier this month.

With effect from 1 May 2019, SBI had linked the interest rate on Savings Bank deposits (for balances above Rs 1 lakh) with the Repo rate (i.e. 275 basis points below Repo rate) without changing the rate of 3.5% for SB balances up to Rs 1 lakh.

The RBI in its third bi-monthly policy had reduced repo rate by 35 basis point (from 5.75% to 5.40%) with effect from 7 August 2019. “Had this rate cut been transmitted to savings bank (SB) deposits, the applicable returns on SB deposits with balances above Rs 1 lakh would have dropped to 2.65% (275 bps below Repo rate, i.e. 5.40%) with effect from 1 September 2019,” it said.

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