Money & Banking

State Bank cuts term deposit rates for second time this month

Our Bureau Mumbai | Updated on August 23, 2019

In view of the falling interest-rate scenario and surplus liquidity, State Bank of India (SBI) has decided to slash retail domestic term deposit rates by 10-50 basis points (bps), as well as bulk domestic term deposit rates by 30-70 bps across tenors.

India’s largest bank had last cut interest rates for retail domestic term deposits below ₹2 crore and bulk domestic term deposits (₹2 crore and above) by 5-75 basis points across tenors on August 1.

The sharp cuts in term deposit rates comes in the backdrop of the bank linking its lending rate for a few products (such as cash credit/overdraft customers with effect from May 1, and a new home loan product with effect from July 1) with the repo rate. So, the term deposit rate cut is aimed at protecting the margins.

Following the latest rate cut, the highest interest rate the bank will offer is 6.70 per cent (6.80 per cent currently) for the one-year to less than two-year tenor, for retail domestic term deposits.

Similarly, in the case of bulk domestic term deposits, the highest interest rate will be 6.40 per cent (6.70 per cent) for the one-year to less than two-year tenor.

SB rates on hold

However, SBI said it has decided not to reduce the savings bank (SB) interest rate further and hold the same at the existing level of 3 per cent for customers with balance above ₹1 lakh. Customers with SB balance up to ₹1 lakh will continue to get the rate of interest at 3.50 per cent.

Following the RBI’s repo rate cut, SBI cut the marginal cost of funds-based lending rate (MCLR) by 15 bps across all tenors, with one-year MCLR coming down to 8.25 per cent from 8.40 per cent with effect from August 10.

Published on August 23, 2019

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