To protect the interests of saving bank depositors, State Bank of India (SBI) has decided to not reduce interest rate further and hold it at the existing level of 3 per cent for customers with balances above Rs 1 lakh.
Customers with saving balance up to Rs 1 lakh will continue to get interest rate of 3.5 per cent like before. The Reserve Bank of India (RBI) in its third bi-monthly policy had reduced repo rate by 35 basis points from 5.75 per cent to 5.4 per cent from August 7.
Had this rate cut been transmitted to saving bank deposits, the applicable return with balances above Rs 1 lakh would have dropped to 2.65 per cent (275 basis points below repo rate of 5.4 per cent) from September 1.
With effect from May 1, SBI had linked the interest rate on saving bank deposits (for balances above Rs 1 lakh) with the repo rate (that is 275 basis points below repo rate) without changing the rate of 3.5 per cent for savings account balances up to Rs 1 lakh.
In view of the falling interest rate scenario and surplus liquidity, SBI has realigned its interest rate on term deposits from August 26. It has slashed retail term deposit rates by 10 to 50 basis points across tenors as well as bulk term deposit rates by 30 to 70 basis points across tenors.
