With deposit accumulation outpacing lending, State Bank of India on Friday cut interest rates on retail term deposits of one year and above by 25 basis points.

It is the third bank to slash rates after private sector rivals ICICI Bank and HDFC Bank cut deposit rates by up to 50 basis points this week.

SBI’s revised deposit rates, effective December 8, are applicable on deposits of up to ₹1 crore. The new rates are also applicable to non-resident external (NRE) deposits of one year and above.

Fresh term deposits — of one year to less than three years, and three years to less than five years — will earn 8.50 per cent interest against 8.75 per cent earlier.

Term deposits of five years and above will earn 8.25 per cent interest (against 8.50 per cent earlier).

The deposit rate cut could be a precursor to a cut in lending rates. Banks prefer cutting deposit rates before pruning lending rates to protect their net interest margins. In its fifth bi-monthly monetary policy announcement on Tuesday, the RBI observed that some easing of monetary conditions has already taken place.

The weighted average call rates as well as long-term yields for government and high-quality corporate issuances have moderated substantially since end-August. However, these interest rate impulses are yet to be transmitted by banks to lower lending rates, the central bank said.

Since the beginning of the current financial year, SBI has tweaked retail deposit rates five times.

In September, it increased the interest rate on deposits of 180-210 days maturity to 7.25 per cent (against 7 per cent previously) and cut the interest rate on deposit in the one year to less than three years maturity bucket to 8.75 per cent (9 per cent).

PTI adds: SBI has decided to raise $300 million by issuing bonds. The proceeds will be used for general corporate purposes, it said in a BSE filing. The bonds will carry an interest rate of 3.95 per cent per annum, which will be paid semi-annually.

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