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State Bank of India cut interest rates on retail term deposits up to Rs 3 crore by 25 basis points and reduced the savings account rate to 2.5%.
SBI cuts interest on savings account by 25 bps to 2.25, all-time lowest in a bid to align with RBI’s repo rate cut.
SBI Savings Rate: State Bank of India, the country’s largest lender, has once again lowered returns for its depositors. From June 15, the bank has reduced interest rates on retail term deposits up to Rs 3 crore by 25 basis points across various tenures. Additionally, it has cut the savings account rate to an all-time low of 2.5 per cent. These reductions affect both new and renewing deposits, mirroring a broader decline in deposit yields following a 50 basis point cut in the RBI’s repo rate earlier this month.
Impact on Margins And Loan Rates
The uniform rate cuts aim to protect the bank’s profit margins. Approximately 45 per cent of SBI’s Rs 36 lakh crore loan portfolio is tied to the repo rate, including Rs 8.3 lakh crore in home loans and Rs 1.2 lakh crore in auto loans. Consequently, the bank’s top home loan rates for new customers now stand at 7.5 per cent.
Financial Implications
The decrease in the benchmark rate is projected to reduce the bank’s annual interest income by around Rs 8,100 crore. To mitigate this impact, reducing savings deposit rates offers the quickest remedy. With Rs 23 lakh crore held in savings accounts, the lower interest payout is expected to save the bank approximately Rs 5,750 crore annually.
SBI is not the only bank making these adjustments. Recently, HDFC Bank also reduced its savings account rate on high-value deposits to a flat 2.75 per cent across all balances, and similarly lowered fixed deposit rates by up to 25 basis points.
In a swift response, many banks followed suit by reducing lending rates as well as those of fixed deposits (FDs). Private sector banks like HDFC, ICICI, IDFC First and Kotak Mahindra have announced reductions on fixed deposits (FD) by 10-35 basis points, while public sector banks like Canara Bank and Indian Bank have also done the same in line with the lenders’ lower benchmark interest rates.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
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