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State Bank of India (SBI) has decided to do away with the maintenance of Average Monthly Balance (AMB) for all savings bank (SB) accounts and cut the interest rate on these accounts to 3 per cent from 3.25 per cent. Further, it has waived SMS charges levied on a quarterly basis.
India’s largest bank seems to have done a fine balancing act in waiving AMB and SMS charges and at the same time cutting the SB interest rate. This move by SBI will prompt other banks to follow suit.
The paring of the SB interest rate comes at a time when the banking system is awash in funds, with the Reserve Bank of India providing banks with liquidity of longer duration (one-year and three years) aggregating ₹1-lakh crore via the long-term repo operation (LTRO) at the repo rate of 5.15 per cent in the last one month.
With the cut in SB interest rates, account holders with balances up to ₹1 lakh (interest rate so far: 3.25 per cent) and above ₹1 lakh will earn a flat 3 per cent.
In a statement, SBI said the monthly balance maintenance has been waived on 44.51 crore SB accounts. “All SBI customers will now enjoy the zero-balance facility in their SB account,” it added. As at December-end 2019, SBI had SB account portfolio amounting to ₹11,51,701 crore.
Currently, SB customers need to maintain an AMB of ₹3000, ₹2000 and ₹1000 in metro, semi-urban and rural areas, respectively. The bank used to levy a penalty of ₹5 to ₹15 plus taxes on non-maintenance of the AMB.
Chairman Rajnish Kumar said “Waiving AMB is SBI’s yet another initiative to provide customers more convenience... We believe this initiative would empower our customers towards banking with SBI and boost their confidence in SBI.”
Deposit rates reduced
SBI also cut interest rates on retail domestic term deposits (below ₹2 crore) of one year and above tenor by 10 basis points (bps). It has also cut interest rates on Domestic Bulk Term deposits (₹2 crore and above) of 180 days and above tenor by 15 bps with effect from March 10.
The term deposit rate cuts come in the backdrop of ample liquidity in the banking system and muted appetite for credit.
Post-revision, the highest interest rate that SBI is now paying retail domestic term deposits is 5.90 per cent (6 per cent earlier) on the four maturity buckets from one year up to 10 years.
Further, the highest interest rate that India’s largest bank is now paying Domestic Bulk Term deposits is 4.60 per cent (4.75 per cent earlier) on the six maturity buckets from 180 days up to 10 years.
SBI had only last month slashed term deposits rates by 10-50 bps in the retail segment and 25-50 bps in the bulk segment.
10th MCLR cut
SBI has cut its marginal cost of fund-based lending rate (MCLR) across tenors by 10-15 bps with effect from February 10. This is the tenth consecutive cut in MCLR by the bank in the current fiscal. One basis point (bp) equals one-hundredth of a percentage point.
Post-revision, the benchmark one-year MCLR is at 7.75 per cent against 7.85 per cent earlier. All rupee loans sanctioned and credit limits renewed with effect from April 1, 2016 are priced with reference to the MCLR, which is the internal benchmark for such purposes.
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