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State Bank of India has cut interest rates on short-term retail deposits by 0.25 per cent.
This move suggests that the bank is flush with liquidity. It is also a pointer to the fact that the softer interest rate regime, heralded by the central bank through a 50 basis points cut in the repo rate in April, is getting entrenched.
After the RBI cut the interest rate at which banks borrow funds from it (repo rate) on April 17, SBI had cut the retail term deposit rates across various tenors by 25 to 100 basis points. A basis point is one hundredth of a percentage point.
Following the latest round of interest rate cut, deposits in the first three maturity buckets — 7 to 90 days; 91 to 179 days; and 180 days — will earn a return of 7 per cent (7.25 per cent earlier). The new interest rate for deposits in the 181-240-day maturity bucket will be 7.25 per cent (7.50 per cent).
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