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State Bank of India has cut retail term deposit rates across various tenors by 25 to 100 basis points.
India's largest bank, however, has refrained from cutting its Base Rate, which is currently at 10 per cent. Banks in India cannot lend below their Base Rate.
By holding back on cutting the Base Rate, the bank may be trying to protect its margins, say analysts.
The highest interest rate that SBI is offering is 9 per cent on a term deposit (of up to Rs 15 lakh) of 1 year to less than 3 years maturity. The deposit rate cuts are effective from April 24.
After the Reserve Bank of India cut the repo rate (the interest rate at which banks borrow funds from the central bank) by 50 basis points to 8 per cent on April 17, the Finance Ministry prodded public sector banks to cut their lending rates to stimulate investment activity.
Banks such as IDBI Bank, Punjab National Bank, Bank of Baroda, and Bank of Maharashtra have cut both their deposit and lending rates following the repo rate cut.
According to SBI officials, a cut in cash reserve ratio would have released primary liquidity of a more durable nature, which in turn would have given the bank room to cut the Base Rate.
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