State Bank of India has cut the interest rate on domestic term deposits of five years and above to 8.5 per cent. This move comes on the heels of the bank slashing interest rates on home and auto loans.
So far, term deposits (with tenures of five years and more) up to Rs 15 lakh and between Rs 15 lakh and Rs 1 crore carried interest rates of 8.75 per cent and 9 per cent, respectively.
The deposit and loan rate cuts come in the wake of the Reserve Bank of India cutting by one percentage point the statutory liquidity ratio to 23 per cent on Tuesday.
The SLR cut has the potential to increase SBI’s liquidity by about Rs 10,000 crore.
India’s largest bank cut interest rates on home loans by up to 0.60 percentage points and those on car loans by 0.50 percentage points on Wednesday. Other banks and housing finance companies are expected to follow suit, else they may lose business.
Despite cutting both deposit and lending rates, the bank will see gradual improvement in margins because it has enough liquidity, Atanu Sen, Deputy Managing Director, SBI.
If the Government operationalises the Guarantee Scheme for education loans, SBI will look at cutting interest rates on these loans.
According to Pradeep Kumar, Deputy Managing Director, SBI: “To transmit the RBI’s expectations that the policy would give a stimulus to credit growth for productive purposes, we decided to reduce the interest rates on home and car loans.” The cut in lending rates is expected to boost SBI’s home and auto lending, growing at 10 per cent now, said Sen.